The Middle East is one of the major growth regions for air travel. But more than 90% of air traffic there does not stay within the region. If its domestic and short-haul international air transport services are to be developed further, major political and economic change will be needed.

“The key challenge for the region is to promote and foster economic and social stability,” asserts the Arab Air Carriers Organization (AACO). That is not so much an issue for the Big Three Persian Gulf carriers—Etihad Airways, Qatar Airways and Emirates—that are less exposed to short-haul markets. But most airlines in the Middle East do not have the benefit of large long-haul operations through which they could link growth markets far from their home economies. They rely on tough groundwork such as liberalization that is often painfully slow and political stability that is still a far-fetched goal in some countries.

AACO itself illustrated part of what needs to change by holding its annual general assembly in Algiers, Algeria. The number of delegates was down significantly compared to past events, simply because the travel arrangements proved too difficult for many. Some were unable to obtain visas, and those that did were hardly able to leave the conference hotel without bodyguards. Algeria has not been involved in the Arab Spring uprisings or made in any serious attempt to liberalize its economy in general and air transport in particular. It is a good example of how things used to be across more of the Arab world.

But elsewhere things have changed and airlines suffer. Almost every Middle Eastern airline relies on tourism as a major source of income. It nose-dived in 2011, the first peak of the Arab Spring, according to the World Tourism Organization. Egypt saw tourist spending fall by 30.5%, Tunisia was even worse at 32.5%, and Jordan was down 16.3%. These three countries have traditionally been the most attractive destinations for tourists. And, for lack of natural resources, tourism has been their most important source of foreign capital.

If there was any hope that demand would recover quickly, reality has already surpassed it. Egypt has entered another phase of civil unrest as protests against constitutional changes proposed by new President Mohammed Mursi, who is supported by the Muslim Brotherhood, unfold. It is too early to speak of any sustainable tourism rebound anyway, but things are looking bleak again now.

Consequently, airline business models that focus on the region are suffering the most, regardless of whether their own home countries are affected by violent unrest. It goes without saying that Syrian Arab Airlines has had a hard time maintaining anything close to a normal flight schedule, and most other carriers have suspended operations into Damascus, with fighting between government troops and the opposition near the airport making the trip into the city an incalculable danger.

Royal Jordanian was forced to make serious capacity cuts and abandon several routes within the region as demand dropped, even though Jordan itself has remained relatively quiet and stable. Many of the airline's flights were into markets that have been directly affected by political instability, complicating efforts to turn around the already struggling carrier.

Air Arabia shelved plans for more bases outside of Sharjah—one of the United Arab Emirates—mainly because of the political situation and had to redirect growth to other markets. CEO Adel Ali says it is unlikely that will change any time soon. But as long as new routes can be developed from its Sharjah base, Air Arabia is still in good shape compared to others.

The situation is far worse for Gulf Air, one of the region's oldest airlines. Shortly before his long-expected departure, then-CEO Samer Majali renegotiated large aircraft orders with both Airbus and Boeing in light of its precarious state. The airline cut its orderbook dramatically as it retreated from an ambitious expansion plan.

The new agreement between the airline and Airbus “ultimately permits” it to convert an order for 20 Airbus A330-300s into a new commitment for eight A320s and up to 16 A320NEOs. The A320s are to be delivered before year -end and the NEOs will arrive in the “latter part of the decade,” says Gulf Air.

The carrier also is likely to reduce its Boeing 787 order. It had 16 787-8s on firm order and is reducing that to 12-16, depending on “strategic requirements,” it says.

Gulf Air has been recording huge losses for some time, with periods of expansion interspersed with restructuring efforts, and it has suffered from legacy problems. The airline was once jointly owned by Qatar, Bahrain, Abu Dhabi and Oman, but eventually all shareholders except Bahrain pulled out. It went through a series of management changes that took it from downsizing to rapid growth and back to downsizing again. A cost-savings program initiated by Majali showed some effect in 2010. But, like Royal Jordanian, Gulf Air has had to suspend a significant number of routes lately due to regional unrest and violence in Bahrain.

One of Majali's major achievements in addition to the fleet downsizing agreement is avoiding a merger of Gulf Air with Bahrain Air, another local airline in serious financial trouble.

With Etihad, Qatar Airways and Emirates much less exposed to the regional markets than their smaller peers, the Arab Spring has also been less of a challenge for them. The Big Three have access to fresh money when they need it, too, although infrastructure is an issue they all face.

Emirates has the most pressing need to grow airport capacity, and it made a major step forward in early January through the opening of Concourse A at Dubai International Airport, the new home base for its A380 fleet. Concourse A will be phased in slowly to allow for teething problems to be resolved.

Runway capacity remains a constraint, however: Dubai International Airport has two runways on which aircraft cannot operate independently due to their close proximity, and Emirates can only move to the new World Central Airport once it is big enough to handle the carrier's entire operation.

Separately, Qatar Airways' home base in Doha is moving to a new airport adjacent to the old field this year, following a delay caused by the late completion of lounges in the new building. Doha's new international airport will provide Qatar Airways with a facility for the first time that is built for connecting traffic. Etihad Airways will also benefit greatly when the Abu Dhabi midfield terminal opens.

To see a breakdown of leading Middle East carriers' fleets in operation and on order, check out the digital edition of AW&ST on leading tablets and smartphones, or go to AviationWeek.com/mefleets