Frost & Sullivan forecasts (22-Feb-2011) the Middle Eastern crisis will "hit the aviation sector soon". Assuming the situation continues, Frost & Sullivan expects oil prices to touch USD115-120 per barrel within the next two weeks which would have a negative impact on profitability at airlines. The Middle Eastern crisis has also restrained the inflow of tourists into the region, especially in countries such as Egypt and Tunisia. [more]
Frost & Sullivan: "The economies of Egypt and Tunisia are strongly supported by Tourism and these economies are in grave danger if the tourist inflow does not get back to normal. Another key threat is the rise of political unrest in the region which would impact the aerospace sector at all levels. The key area which would feel its impact is the offset sector where the foreign investors would be reluctant to procure from this region...... There is also a risk of civil war in the region which would lead to the unstable airport infrastructure, airline operators and MRO market apart from destabilizing the entire economy of the region....Libya produces about 1.6 Million barrel of oil, majority of which is exported to Europe. Saudi Arabia would need to increase its production to cater to the European needs, failing which the economies in Western countries would be in a risk because the oil prices would increase. This would risk the stability of the economy as the oil prices form a part of the inflation..if the oil prices continue to rise it will be bad news for Aircraft Manufacturers, Airline Leasers, Component Manufacturers, Airports and the MRO houses. All the associated trade with each of these sectors would also be affected. The political turmoil in Middle East is a good platform for the entry of radical groups which need to be addressed with utmost caution, failing which the entire Middle East would turn out to be another disturbed region and would affect the entire global economy," Company Statement, 22-Feb-2011.