Gulf’s top airlines take different paths to soar post-Covid

• Etihad is trimming fleet, focusing on sustainability and profit
• Qatar is in alliance with BA, American Airlines and Japan Airlines
• Emirates aims to fly 58 million customers per year

The air travel industry was among the worst hit globally by the coronavirus pandemic and its ensuing lockdowns and border closures — and the Middle East’s industry was no exception. 

According to a report by McKinsey & Company, the pandemic caused global aviation revenues to drop by 60 percent in 2020, and airlines lost a total value of around $167 billion that year. Global air travel and tourism, said McKinsey, is not expected to return to 2019 levels before 2024.

• Airlines forecast higher fares after energy price spike
• Emirates widens refurbish plan amid delivery delays

In the Middle East, the situation was similarly bleak. According to the International Air Transport Association, in 2020, the Middle East’s various airlines posted losses of $7.1 billion; about $68 for every passenger flown.

But as vaccine rollouts continue and normality appears to be returning, Etihad Airways, Emirates, and Qatar Airways are carving out different approaches to the post-pandemic aviation industry.

Martin Drew, SVP Global Sales and Cargo at Etihad Airways, told AGBI he is “very confident” that Etihad will make a strong post-pandemic return to the skies.

Our priority is to continue rebuilding our operations while retaining a complete focus on profitable flying

Martin Drew, SVP Global Sales and Cargo at Etihad Airways

“In only 18 years, Etihad has built a strong reputation and loyal customer following, which has only grown stronger following our response to the pandemic and increasing focus on sustainability,” said Drew. 

“Our priority is to continue rebuilding our operations while retaining a complete focus on profitable flying and continuing to optimise our cost base. Etihad is a far more efficient business in 2022 than it was four years ago, when we started our transformation journey.

“Sustainability remains a key priority for the airline, which has proven its commitment through a variety of initiatives and announcements.”

Drew also pointed out that it is still in the process of undergoing a transformation of its business model.

“Etihad has been navigating its way through a transformation programme since Tony Douglas joined Etihad as its CEO. This transformation is set to continue until 2023, enabling Etihad to be a leaner and more agile business with a core focus on sustainability.”

John Grant, Executive Vice President of travel analytics firm OAG, echoed Drew, pointing out that Etihad had been already shifting its strategy away from broad coverage, and toward targeting “niche and boutique markets.”

Up until 2017, the Abu Dhabi-based carrier had spent billions buying up struggling regional air carriers to expand its footprint — a strategy that “made no sense,” said Grant, and was aborted in 2018 when Douglas joined.

They have learned from their mistake, Grant explained: “They had to look at where they go, and how frequently they go — they’re still serving many of the major cities that they need to, but not with the same degree of frequency as Emirates or Qatar.”

While Etihad is trimming its fleet and focusing on sustainability and profit, Emirates and Qatar, too, are diverging. The most notable difference between the two, said Grant, is Qatar’s membership of the Oneworld alliance, and Emirates’ decision to go it alone.

“Emirates and Qatar Airways are continuing to do quite well — they’re back to about 85 percent of what they previously operated,” said Grant.

Membership of an alliance opens up more routes, he said, but means that Qatar Airways’ success lives or dies on the success of the global travel market and its alliance partners.

Qatar Airways is the only major Gulf airline to be a part of an alliance, allowing it to offer and receive customers from partners including British Airways, American Airlines, and Japan Airlines.

Meanwhile, with 115 Airbus A380s and 153 Boeing 777s — and other 126 pending delivery — to call on, Dubai-based Emirates will lean on its sizeable fleet to draw in customers by offering regular flights to hundreds of destinations. In this way, it will aim to return to its pre-pandemic days of flying as many as 58 million customers per year, and the $631 million in profit that generated in 2018/2019.

Turkish serves more countries than any other airline in the world, and they’re very proud of that. They are a serious threat

John Grant, travel analytics firm OAG

None of the three major Gulf carriers have significant domestic markets to fall back on, and so all three are vulnerable to future global disruption, said Andrew Charlton, managing director of air transport strategy consultancy Aviation Advocacy.

The geopolitical winds now, with the Ukraine conflict raging and Russia and Europe closing their airspace off to each other, are in all of the big three’s favour.

Right now, “everyone else has to divert, the big three don’t have to divert,” said Charlton, but he made clear that this can quickly change if escalations take place in any of the wider region’s flashpoints.

And other challenges present themselves, too.

John Grant said: “For all of the three carriers in the region, one of the challenges remains that China and Japan are still heavily restricted in terms of lockdowns, and are likely to stay that way for quite some time. These are important markets with quite a bit of business traffic going back and forth.”

Other challengers are appearing on the scene, too — perhaps most notably Turkish Airlines. “As an airline, Turkish serves more countries than any other airline in the world, and they’re very proud of that. It’s an expansive network. They are a serious threat,” said Grant.

Given Turkey’s unique geographic positioning — a bridge between Europe and Asia — they are challenging both European and Gulf carriers at the same time, he added. 

Turkish Airlines has a domestic market of 84 million people to develop, far more than any Gulf state, as well as having “a number of the same geographic and equipment timing advantages of the big three,” according to Charlton.

There are challenges closer to home, too.

“Low-cost airlines are grabbing and gaining share in the Middle East,” John Grant said, pointing to Air Arabia in Sharjah, Fly Dubai in Dubai, Wizz Air in Abu Dhabi, and Jazeera Airways in Kuwait.

“The low-cost airlines are increasingly upping their games and their networks in that part of the world — some of which appeals to migrant workers from the Indian subcontinent, but also up into central Europe and down into Africa, as well. There is a much more dynamic supply of capacity in the region at the moment.”

Grant also warned that prices are likely to rise across the board, due to inflation and specifically because of energy prices going up.

But “two years of pent-up demand,” he said, means that the “the market will hold,” as people everywhere look to return to the skies.