CAIRO: Middle East airlines will likely suffer from higher jet fuel prices, lower passenger growth and competition from national carriers, Nomura said, and downgraded Air Arabia and Jazeera Airways .
The brokerage cut its rating on Air Arabia to "neutral" from "buy," and Jazeera Airways to "reduce" from "neutral." It also cut its price target on Middle East transportation stocks Agility and National Shipping Co of Saudi Arabia (NSCSA).
Nomura reduced its forecast for passenger growth in the Middle East region to 7 percent a year from 2011 to 2016, due to recent political uprisings in the region. It had previously expected 10 percent passenger growth per year.
Regional carriers are lagging behind in terms of operational and financial strength, compared with the bigger national carriers, who are increasingly running Boeing 777s and Airbus A380s on short-haul routes to optimize carrying capacity and/or access specific premium cabin traffic, Nomura said.
"The transit nature of the Middle East means passenger traffic is not always retained within the region to exploit short-haul domestic routes for leisure and/or business travel, which is to the detriment of small domestic carriers," Nomura said in a note.
