Business Traveller (Asia-Pacific)
BRIDGING THE GULF
Alex McWhirter charts the rise of the Middle East carriers – and ponders how their rivals are fighting back
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.