India’s airlines face fight for market gains from the Gulf

The success of the Gulf’s “Big Three” airlines – Emirates, Etihad and Qatar Airways – has been somewhat dependent on its ability to connect global traffic and grow destinations.

Such transit flows have proved extremely lucrative.

For many years, Gulf airlines “stole” connecting traffic – via the Middle East – from India. 

But today, India is fighting back. And make no mistake, the cash stakes are high.

India’s aviation market, the world’s third largest, has a chequered history.

From the glorious past of Air India and the ambition of Jet Airways to the flamboyance of Kingfisher, the country’s airlines have tried and failed to conquer an extremely regulated market with more failures than successes. 

• Qatar Airways CEO calls for realism over net-zero targets
• Air India-Vistara scrutiny ‘is good news for Gulf carriers’
• Tunisair’s turbulence a ‘toxic mix of circumstances’

But all of that is changing – and quickly.

Air India, now part of the Tata Group, is rapidly expanding into major overseas markets where it already has a presence.

It has doubled down on its services to London, opened new services to Australia and expanded its US network. 

India’s low-cost airline sector is accelerating rapidly, bolstered by record orders for new aircraft, its expansion into regional markets underpinned by an emergent middle class with disposable income.

All these factors make up the perfect recipe for success – just ask Ryanair.

The big prize

India’s attempt to claw back its natural Middle East transit market is essential for its growth, but Gulf airlines are unlikely to take the move lying down.

India is a relatively close market for the big three airlines and has seen considerable investment in the market.

For Etihad, nearly 15 percent of scheduled flights in July will be operated to India.

The combined Emirates and FlyDubai operation, meanwhile, places 11.5 percent of all its flights into the market. 

Qatar Airways is less invested in India, as it has a smaller migrant worker market. As a later market entrant, the airline has also faced difficulty securing routes.

For all three, scheduled services to and from India are designed to connect with the major waves of flights to Europe and North America.

Abu Dhabi’s Etihad even offers a US pre-clearance facility for passengers transiting through the airport making for a seamless arrival in the US.

Analysis of the revenue generated by the major carriers over the last four years highlights the importance of the transit market.

In 2022 Emirates generated more than $2 billion in connecting revenues to and from India, capitalising on the earlier easing of travel restrictions after the pandemic, while other airlines remained closed or limited in their capacity. 

Etihad earned more than $500 million and Qatar over $1 billion in the same period.

The potential risk from an increasingly well-developed airline market in India stretches beyond purely the headline revenue numbers to specific country markets.

The biggest risk markets for the big three are the US and the UK. 

In 2022 alone, Emirates generated more than $1.2 billion from its five connecting country markets – the US, the UK, South Africa, Germany and Saudi Arabia – to and from India via Dubai International.

Ultimately, it’s unlikely that any of the three major Middle East carriers will lose all their revenues, particularly when one considers routes to some of the larger Indian cities that do not have long haul services to the US or Europe.

However, there is no doubt that the Indian market is becoming increasingly competitive.

This, in turn, will mean both competitive fares for the traveller and more choice of carriers. And that’s no bad thing.

John Grant is partner at UK consultancy Midas Aviation