Falling Oil Revenues Depress Traffic : Mideast Airlines Struggle as Their High-Flying Days End

After a decade of growth, the boom is over for the Arab world’s 14 international airlines, which helped to open up the Persian Gulf states to the world just as trains opened up the American West a century ago.

Passenger traffic increased fivefold to 20 million revenue passenger miles annually in the Mideast between 1970 and 1980, making this the fastest-growing air market in the world during that period. Boeing Co. alone has sold 300 jets in the region since its first sale of a 720B to Saudi Arabia in 1961.

Ultramodern airports have became one symbol of boundless wealth, and for a while seemed to sprout up overnight. There are eight international airports just in the cluster of oil sheikdoms around the Gulf. Saudi Arabia’s new Riyadh facility is said to be the most expensive and functional in the world. Even war-torn Iraq managed to open a gleaming new terminal of glass and marble in 1982.

As the oil-producers’ carriers competed with European and Asian airlines for passengers and cargo, ticket prices became negotiable and regulation gave way to an “open sky” policy in many areas. To this day, foreign carriers do not even need government approval to operate scheduled flights into the United Arab Emirates. They just have to notify the authorities of their intentions one week and can start service the next.

For most Arab carriers, however, 1984 was the least profitable year of the past two decades because of falling oil revenues and, to a lesser extent, regional conflicts.

Kuwait Airways, whose passenger load had been growing by 15% a year, saw it fall almost 10% last year. Gulf Air, owned by Bahrain, Oman, Qatar and the United Arab Emirates, managed a 7% increase in revenue, but higher overhead, as yet not fully calculated, made it a lean year. In Beirut, where warfare kept the airport closed for 153 days, Lebanon’s Middle East Airlines lost $36 million, and many takeoffs involved nerve-wracking decisions.

“If there is a lull of half an hour in the fighting, we make the decision to go or not to go,” said Salim Salaam, the airline’s president. “Then we load the passengers and go. Sometimes we are caught by the shelling. I usually tell the pilot in the cockpit it is safer to go than to risk disembarkation.”

The 4-year-old war between Iraq and Iran also affects airline operations: Passengers on Iraqi Airways are required to pull down their window shades during nighttime approaches to Baghdad so that the planes will not be a target for Iranian gunners.

The threat of terrorism in the Mideast also is a major concern for aviation authorities. Security has been increased substantially in the past two years. Passengers and their hand luggage pass through X-ray machines both while entering and leaving Persian Gulf states. Iraq makes passengers check in four hours early for some Iraqi Airways flights.

Egyptian authorities order Middle East Airlines flights arriving from Beirut into an isolated area of the taxiway and immediately search all the hand luggage of disembarking passengers. Kuwait puts plainclothes security agents on some of its flights, Libya’s national carrier, Jamahirya Libyan Arab Airlines, is not even allowed to land at most Arab airports, and any traveler carrying an Iranian passport is immediately suspect in the Gulf.

But the biggest problem facing most Arab carriers is simple economics. With the oil recession, oil-producing countries are cutting back on the millions of migrant laborers that they import from Egypt and Asia, and that in turn lowers the seat-occupancy rate. They cannot take up the slack with non-business travelers because, except for Bahrain, the Gulf states and Saudi Arabia do not allow tourists.

“Some routes, like Cairo to the Gulf, you can still fill every seat because of all the migrant workers,” said Ali AlMalki, Gulf Air’s chief executive and a University of Florida graduate. “We don’t even advertise on that route. People are going to make the trip no matter what--on a dhow, if necessary.

“But on competitive routes, like to Europe, where we control 45% of the business, we are being more aggressive in marketing. You just have to prove to the passenger that your airline is better.”

The quality of the Arab airlines varies widely, ranging from Bahrain-based Gulf Air, which has won several prestigious European awards as the best airline serving the Mideast, to EgyptAir, which treats passengers as something of a necessary nuisance and makes most of its revenue transporting 3 million peasant laborers to and from their jobs in the oil-producing countries.

Despite slacker business prospects, airports in the Gulf are still prospering. Bahrain and the United Arab Emirates are fueling stops for almost all flights on the long hauls between Europe, Asia and Australia. Seventeen international airlines serve Bahrain--a dozen or more jumbo jets land here on any given night--and each year 3 million passengers pass through Bahrain’s terminal, a remarkable figure considering that the population of this island-state is only 360,000.