Middle East Turmoil Impacts Airlines
The political turmoil engulfing parts of the Middle East is expected to have longer-term effects on the aerospace industry beyond the disruption in flight activity and run-up in oil prices witnessed in recent days.
For airlines, the prospect looms that in the medium term, bookings may be depressed as travelers avoid the political hotspots that have seen Egypt’s President Hosni Mubarak agree to quit office this year and Yemen’s President Ali Abdullah Saleh offering to do so in 2013, while Jordan’s King Abdullah II has reorganized his government to stave off protests.
But the implication for defense may be greater. One industry official warns modernization decisions could be put on the back burner as governments reevaluate whether domestic security needs should trump other military purchases. While the strength of the Middle East defense market is not expected to suffer in the long term, a reshuffling of priorities may emerge in coming months.
One of the biggest variables will be how the U.S. relationship with the affected countries evolves. The U.S. is not just a huge donor of financial aid to Egypt—an estimated $1.3 billion —it also has been aiding Yemen’s build-up of domestic security. Last month, the Yemen air force received four Bell UH-1 Huey utility helicopters; pilots are already in the U.S. for training.
The U.S. financial largesse has also given American industry a leg up in many Egyptian defense procurement decisions. Some of that equipment will need to be replaced soon, and a rift in the relationship between Cairo and Washington could open the door to other bidders.
The key to the U.S.-Egyptian relationship is held by the military, which has, so far, tried to calibrate its role in the crisis so that both the masses of demonstrators and the government are assuaged. The military, keen to sustain U.S. funding, is expected to remain a center of power regardless of the make up of a post-Mubarak government, injecting a sense of optimism that tensions on the Egyptian-Israeli border will remain in check. Rhetoric may heat up, but military action is seen as unlikely, even in Israel.
That said, the Israel Defense Forces (IDF) are monitoring the situation and have shifted intelligence, surveillance and reconnaissance assets as an aid in their keeping an even closer eye on the neighbor to the west.
Also, the IDF will soon call for the establishment of an additional division (a five-year process) to counter any emerging threat from Egypt. What is more, the prospect of a new IDF headquarters being established in the south to manage any potential operations there now seems to be more viable. Military officials also are expected to call for an increase in funding of around 1.5 billion shekels ($404.5 million).
With clashes between protesters and pro-Mubarak forces—at least partly staffed by non-uniformed police—leading to severe violence on Cairo’s central Tahrir Square, tens of thousands of foreigners struggled to exit the country last week. Operations at Cairo International Airport have become increasingly chaotic. According to local reports, up to 3,500 passengers ended up spending the night at the airport on Feb. 1because airlines canceled many of their scheduled flights. Several passengers reported they were forced to pay up to $2,000 to security staff or policemen in order to be allowed to board flights. One source counted 19 checkpoints on the way from downtown Cairo to the airport.
During the day, the passenger count at the airport grew to around 18,000. The country’s state-owned carrier, Egyptair, canceled about two-thirds of its services, according to some reports. At the same time, other airlines dispatched charter flights to Cairo to fly out as many travelers as possible. Among the countries that organized charters, China dispatched six aircraft and Austria sent a military transport that was also used by other Europeans. Lufthansa used three Boeing 747-400s on a single day to fly home more than 1,000 Germans. Thai Airways operated a second rescue flight, and Iraq assigned three jets to the cause, including the presidential transport.
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