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Airline industry relieved as oil prices down to 5-year low

Xinhua, February 3, 2015 Adjust font size:

After years of pressure on profits driven by high oil prices, airliners and aerospace maintenance and repair service providers express relief as oil prices dropped to a five-year low.

"Global airline industry faces huge demand for the coming years," Bin Teng, senior sales director Ameco Beijing, one of China's leading MRO (maintenance, repair and operations) firm.

He made the assertions at this year's Middle East MRO exhibition and conference, which started here on Monday.

According to global consultancy ICF international, the Middle East accounted in 2014 for seven percent of worldwide air transport MRO demand.

"This region is one of the top growth markets for us," said Bin.

Oil prices have seen huge decline since June 2014, while the trading price ranges from 44 to 48 U.S. dollars per barrel since the beginning of this year, the lowest level since 2009.

Tim Fox, chief economist at Dubai's biggest bank Emirates NBD, attributed the oil price slump to the over-supply by the OPEC members and the rise of shale oil production in the United States.

Hani Arab, head of public relations at Saudia Aerospace Engineering Industries, a subsidiary of Saudi Arabian Airlines, said while low oil prices are not good for the Saudi Arabia's fiscal budget, but they gave airliners a relieve from high costs they were facing from 2011 to mid-2014 when oil was trading above 100 dollars a barrel.

"We currently focus with our MRO services on the Middle East. In a second and third step, we plan to expand to Africa and Asia," said Arab.

Kay Lower, head of technical services at Airberlin Group, the German budget flyer, appeared cautious optimistic.

"We do not see that airliners will buy more planes because oil prices declined. We also do not reduce our prices for MRO services," he said.

However, the current situation gave Airberlin Group room to reach out to new clients abroad, he said, adding that it plans to further expand its business in China, a top growth market for the company.

ICF international expects the Middle East airline industry to grow by 5.3 percent per year leading up to 2025. Enditem