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Gulf airlines flying high again, but facing fresh headwinds

Ownership of Etihad Airways was transferred to UAE sovereign wealth fund ADQ in 2022 to boost Abu Dhabi’s status as a transport hub Etihad
Ownership of Etihad Airways was transferred to UAE sovereign wealth fund ADQ in 2022 to boost Abu Dhabi’s status as a transport hub
  • Qatar Airways is a ‘leading global airline’ with top sports sponsorships 
  • Emirates is spending $2bn refurbishing cabins of 120 jets
  • Etihad’s new CEO led a major turnaround of Tap Air Portugal

As global air travel continues to rebound from the coronavirus pandemic, the biggest airlines in the Arabian Gulf – Emirates, Qatar Airways and Etihad – are soaring back into clear skies.

But can they maintain their rate of climb?

Beyond economic and geopolitical pressures, there’s increasing competition from low-cost airlines, resurgent long-haul competitors and globally ambitious challengers in India and Saudi Arabia.

Pre-pandemic, Emirates served 145 destinations with 267 aircraft. It is now back to 140 and 225 respectively. Through measured reconstruction of its network, it expects to restore all routes and planes by year end.

In the first half of this financial year 20 million journeys were flown with Emirates, 32 percent below 2019, but 228 percent above last year.

“We haven’t been fully able to get back to pre-pandemic levels quickly because we want to return stronger and better,” chief commercial officer Adnan Kazim told AGBI.

With over 200 new aircraft on order, but none due this year, Emirates is spending $2 billion refurbishing cabins of 120 existing jets, and has expanded through new partnerships with other airlines and 10 national tourism boards.

Qatar Airways is also surging back, aggressively positioning as “the leading global airline” with a strategy of ubiquitous branding, prestige product, and significant sports sponsorships. 

It continued flying most of its fleet and expanded its partnerships during the pandemic. This cemented its position on existing routes, strengthening brand and network through sheer market presence while others held back.

In 2019, Qatar operated 257 aircraft to 140 destinations. It is now up to 250-plus aircraft serving over 150 routes, in line with a plan to “pursue every business opportunity”.

In addition to existing football sponsorships, Qatar rode the wave of traffic generated by the 2022 Fifa World Cup in Doha and has just been appointed Official Airline of Formula 1 motor racing until 2028.  

“F1 is a global sport requiring a global airline partner that offers extensive global connectivity,” said the airline’s CEO Akbar Al Baker. 

QatarUnsplash/Saif Zaman
Qatar Airways is now up to 250+ aircraft serving over 150 destinations. Picture: Unsplash/Saif Zaman

Etihad, the smallest of the three carriers, is rebounding not just from Covid, but also dramatically downsizing after failed investments in other carriers.

At its peak in 2015, Etihad served 100 destinations with almost 120 jets, versus 71 and 79 respectively today. But now, in its 20th year, there are strong signs of a return to major growth. 

Last October, Etihad was folded into the Abu Dhabi Developmental Holding Company (ADQ), a government entity with investments including Abu Dhabi Airports and WizzAir Abu Dhabi. 

ADQ announced the departure of Etihad’s CEO Tony Douglas and named Antonoaldo Neves, an aviation executive who turned around the fortunes of Tap Air Portugal, as his successor.

While no strategy has been detailed publicly, ADQ wants to make Abu Dhabi “a global aviation hub” and Etihad “a leading global airline,” reversing the mid-size carrier messaging of recent years.

The long-delayed Midfield Terminal at Abu Dhabi airport is also finally expected to open this year.

But as Gulf carriers recover, they face critical challenges from major, well-funded and fast-growing competitors in India and Saudi Arabia.

The situation is richly ironic, because a decade ago, Etihad, Emirates and Qatar were the major, well-funded and fast-growing competitors, challenging their large legacy counterparts.

EmiratesEmirates
With over 200 new aircraft due this year, Emirates is spending $2bn refurbishing cabins of 120 existing jets. Picture: Emirates

One year after industrial conglomerate Tata Sons bought Air India following decades of neglectful state ownership, the Air India Group has been formed, encompassing the national airline, low-cost Air India Express, and, subject to approvals, Air Asia India and Vistara.

Singapore Airlines will own 25 percent of the group, which just signalled its intentions for serious domestic and international growth with orders for 470 Airbus and Boeing jets.

This overshadows previous mega-deals by Gulf airlines, and is likely to absorb a chunk of future traffic that might otherwise flow to them or through their hubs.

In Saudi Arabia, the government is spending hundreds of billions of dollars on tourism and aviation, including reinventing Riyadh’s international airport as a 54sq km aviation ‘mega hub’, double the area of Dubai Airport, the world’s second busiest after Atlanta.

Although there is no formal detail, Saudi is also planning a new global airline, RAI, to challenge the Gulf trio.

“The amount of investment that the Saudis are making is mind boggling, and a serious disruptive influence,” said John Grant, senior analyst with aviation data group OAG.

“The market is not big enough for a major new entrant. That will be a big issue for all the carriers in the region.” 

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