BRIDG­ING THE GULF

Alex McWhirter charts the rise of the Mid­dle East car­ri­ers – and pon­ders how their ri­vals are fight­ing back

Business Traveller (Asia-Pacific) - - CONTENTS -

Air­lines from the Mid­dle East have shaken up the avi­a­tion in­dus­try. How are their ri­vals re­spond­ing?

When I in­ter­viewed Emi­rates founder Sir Mau­rice Flana­gan back in April 1986, his air­line was start­ing life with a hand­ful of planes. The idea was that Dubai would have its own air­line rather than rely on Bahrain-based Gulf Air for con­nec­tiv­ity, so would be bet­ter rep­re­sented on the world stage.

No­body could have pre­dicted that the fol­low­ing 30 years would see Emi­rates be­come the world’s largest air­line in terms of in­ter­na­tional mileage flown, and that Dubai would over­take Lon­don Heathrow as the world’s lead­ing in­ter­na­tional hub.

Gulf avi­a­tion has changed be­yond all recog­ni­tion. The region’s three ma­jor air­lines – Dubai’s Emi­rates, Abu Dhabi’s Eti­had Air­ways, and Qatar Air­ways – have built their fleets and net­works at the ex­pense of ri­vals in both Eastern and Western hemi­spheres. To­gether, these car­ri­ers have changed the trav­el­ling lives of millions of people around the globe.

POINT OF TRANS­FER

The Euro­pean car­ri­ers ini­tially viewed the new­com­ers as ir­ri­tants, just as they had with the emerg­ing Asian air­lines in the 1970s. But once the Gulf car­ri­ers gath­ered mo­men­tum, the Euro­peans be­came alarmed be­cause they of­fered millions of pas­sen­gers the op­por­tu­nity to over­fly Europe.

For many decades, Europe saw it­self as the cen­tre of world avi­a­tion. Pre­vi­ously, In­dian na­tion­als or ex­pats head­ing to North Amer­ica would route via Europe. Some still do, but in­creas­ing numbers are at­tracted to the Gulf car­ri­ers with their non-stop flights to ei­ther the US east or west coast.

Sim­i­larly, those trav­el­ling from North Amer­ica’s se­condary cities to Africa, or vice versa, found it just as con­ve­nient to take Gulf rout­ings rather than change else­where in the US and again in Europe. In pre-Gulf days, Asian busi­ness trav­ellers bound for Africa or Latin Amer­ica had lit­tle choice but to route through Europe. To­day, that’s no longer the case.

The Gulf car­ri­ers weren’t that in­no­va­tive – they sim­ply copied the busi­ness mod­els of Dutch air­line KLM and Sin­ga­pore Air­lines. They grew by tar­get­ing trans­fer rather than point-to­point pas­sen­gers. In that re­gard, they were as­sisted by avi­a­tion­minded gov­ern­ments, ben­e­fi­cial ge­o­graph­i­cal lo­ca­tions, the abil­ity to op­er­ate 24 hours, and labour flex­i­bil­ity. In many cases they faced lit­tle, if any, com­pe­ti­tion.

The Chi­nese – and in­creas­ingly, the Ja­panese – are in­vest­ing heav­ily in African in­fra­struc­ture. But as yet not many Chi­nese or Ja­panese air­lines fly there di­rectly from their home coun­tries, with only East and South Africa served in­fre­quently. Equally, how many flights does Bri­tish Air­ways (BA) op­er­ate from the UK, or Air France and Lufthansa from air­ports out­side their main hubs?

The past six years have seen the Gulf air­lines strengthen their net­works by serv­ing both main and se­condary des­ti­na­tions. In Asia, they now fly from points as var­ied as Chengdu and Yinchuan in China, Nagoya in Japan, An­ge­les in the Philip­pines, as well as Phuket, Bali and Perth.

So if I am based in cen­tral China and want to fly to Lis­bon in Por­tu­gal, do I take a one-stop flight via the Gulf or opt for a trick­ier rout­ing via Hong Kong and Lon­don or Madrid? If an Ital­ian busi­ness trav­eller based in Emilia Ro­magna wishes to visit Asia, do they trek north to Mi­lan or south to Rome, or sim­ply take Emi­rates from their lo­cal air­port of Bologna? Does the Bel­gian ex­porter bound for a se­condary In­dian des­ti­na­tion route through the Gulf, or un­der­take an Am­s­ter­dam or Paris trek fol­lowed by a plane change in Mumbai or Delhi?

FEEL­ING THE HEAT

It’s true that some coun­tries have sought to pro­tect their na­tional air­lines by re­strict­ing the Gulf car­ri­ers. But it’s highly po­lit­i­cal – take a look at the ac­cu­sa­tions on fo­rums re­lated to the cur­rent US elec­tron­ics ban on flights – and they haven’t al­ways suc­ceeded. In any case, no mat­ter what some gov­ern­ments do, the Gulf air­lines con­tinue to ex­pand.

Over the past six years, what im­pact have the Gulf car­ri­ers had on the vo­lu­mi­nous traf­fic flows be­tween Europe, Asia and Aus­trala­sia? Mar­ket growth has mainly shifted to the Gulf car­ri­ers. One need only look at the vast num­ber of wide-body flights op­er­at­ing daily be­tween the Gulf, Asia and Aus­trala­sia. Yes, there have been a few cases where the Euro­pean car­ri­ers have started new routes but, on the other hand, some have been dropped.

For ex­am­ple, Kuala Lumpur and Jakarta have been axed by Air France and Lufthansa; Aus­trian Air­lines and Lufthansa both scaled back their Gulf op­er­a­tions; Vir­gin Atlantic cut Mumbai, Syd­ney and Tokyo; and BA’s Aus­tralasian op­er­a­tion has been re­duced to a sin­gle daily Syd­ney flight. Mean­while, Qantas threw in its lot with Emi­rates – its Lon­don ser­vices now route through Dubai in place of Sin­ga­pore, and although it still flies twice daily to Lon­don from Australia, its other routes have been handed to Emi­rates.

Some Asian air­line weak­nesses have been ex­posed. Thai Air­ways and Malaysia Air­lines have both scaled back their Euro­pean ser­vices. Philip­pine Air­lines and Garuda In­done­sia re­turned to Europe with grand am­bi­tions but failed to re­alise that the mar­ket had changed in their ab­sence. Plans to res­ur­rect routes to Paris, Frankfurt and Rome came to noth­ing.

Nei­ther are the low-cost car­ri­ers im­mune. They’re adept at woo­ing pas­sen­gers from the es­tab­lished air­lines, but fly­ing long haul is a dif­fer­ent mat­ter. They find it hard to com­pete with Gulf avi­a­tion when you add on the cost of an­cil­lary fees and the fact that the Mid­dle East air­lines op­er­ate from more con­ve­nient air­ports.

The bud­get mar­ket is price driven; it has no loy­alty. So if a mem­ber of the Malaysian com­mu­nity in Glas­gow wanted a cut-price trip to visit fam­ily in Kuala Lumpur, it meant a choice be­tween Emi­rates and Air Asia X. The cost and in­con­ve­nience of get­ting to Lon­don – let alone the cost of the an­cil­lar­ies – meant Emi­rates won.

Air Asia X threw in the towel and re­treated to Malaysia. To be fair, fuel prices at the time were much higher and the bud­get air­line was op­er­at­ing in­ef­fi­cient air­craft. Whether or not Air Asia X re­turns to Europe with more fuel-ef­fi­cient planes re­mains to be seen. In the mean­time, SIA’s Scoot plans to fly to Europe next year with a Sin­ga­pore-Athens ser­vice. With low fuel prices and a leisure-based prod­uct, it might just work… but don’t hold your breath.

Some air­lines are not just los­ing pas­sen­gers. Kenya Air­ways has also lost staff. The gen­er­ous (by Kenyan stan­dards) salaries paid in the Gulf have prompted a brain drain that has led to its tech­ni­cal depart­ment be­ing sig­nif­i­cantly un­der­staffed.

Still, some car­ri­ers are fight­ing back. The Lufthansa Group has formed joint ven­tures with fel­low Star Al­liance mem­bers Air China and Sin­ga­pore Air­lines, while Skyteam mem­bers Air France, KLM and Delta want to form a joint ven­ture with In­dia’s Jet Air­ways. So far it’s too early to say how ef­fec­tive these part­ner­ships will prove. In any case, it may take only the re­turn of high fuel prices, po­lit­i­cal un­rest or an eco­nomic down­turn for the sit­u­a­tion to change yet again.

Left: Three of Emi­rates’ ex­ten­sive A380 fleet

Clock­wise from this page top: Qatar Air­ways A380-800; Ha­mad In­ter­na­tional Air­port; Abu Dhabi air traf­fic con­trol; Abu Dhabi Mid­field Ter­mi­nal; and Dubai In­ter­na­tional’s new Con­course D

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