Middle East airlines are taking control of their destiny

Etihad

For many years, the Middle East aviation market seemed to have as many international airlines operating as locally based carriers.

Before the arrival of the B747-400 and its competing rivals, airlines operating between South East Asia and Europe required a technical stop en-route. With its cheap oil, 24-hour operations and some local market demand, the Middle East was that place.

Some of us may remember boarding a flight at 03:00 in somewhere like Bahrain with the aircraft half full of sleeping passengers from Singapore, wondering why they had stopped here on their way to London.

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Slowly but surely, the proportion of international flights operated in the Middle East by local airlines has been climbing ever higher as both legacy and low-cost carriers expand their international networks.

This year nearly 76 percent of international capacity from the Middle East will be operated by locally based carriers, slightly down from the 2019 pre-pandemic level of 78 percent. That reduction has been caused by the arrival of one of Europe’s most “disruptive” airlines into the region from 2018. 

Losing share

The list of overseas airlines that have either left the market or lost share includes several major carriers such as British Airways, which until 2005 was the largest carrier by capacity to the region and now ranks 14th. KLM was the fifth-largest overseas carrier in 2000 and is now in the 22nd spot.

The first hint of a low-cost airline developing a strong position in the market was in 2010, when Air India Express appeared in the top ten. This year there will be five low-cost carriers in the list as the likes of Ryanair, Wizzair and Pegasus expand their operations further. 

The reductions in international airline capacity to the Middle East and particularly from the legacy carriers is a reflection on their not being able to both compete with the superior quality product offered by the locally based airlines and the prices at which those carriers are able to sell those services.

The reduction in the range of destinations served by European-based legacy carriers to the region is telling. 

The growth of Turkish Airlines and the power of its Istanbul hub is a story we have discussed before. Istanbul’s relative proximity to the region has allowed the airline to nearly treble the number of destinations which it serves; no other international airline outside the region has invested so heavily in the Middle East.

Indeed, most European carriers have been dropping the number of destinations they serve. British Airways has more than halved its network, dropping points such as Riyadh, Muscat and Abu Dhabi from its route map.

KLM – which once had a highly effective operation connecting many UK regional markets to the Middle East – has in recent years dropped Dammam and Doha. 

There is no doubt that airlines from outside the Middle East have been continually squeezed, in part because of the competitive product but also because of the growth in regional services and frequency of service.

To take just one example, in 2000 there were 14 flights a week between Dubai and Riyadh, with airlines such as Swissair and Ethiopian Airways operating services. This year there will be 171 weekly services from a combination of Saudi and UAE-based carriers alone.

Continual network growth

The growth of the “Big Three” Middle East airlines – Emirates, Etihad and Qatar Airways – has been well documented, but they are not the only airlines that have been adding new routes in the last 20 years.

In 2000, 562 routes were served with an average of five flights a week. Fast forward to 2023 and 1,286 international routes are being served at an average weekly frequency of 10 flights a week, a significant increase and proof of how connectivity in the Middle East has improved over time.

Only one major legacy airline in the region has seen a reduction in the number of international markets served: Gulf Air. Changes in ownership structure, adjustments in strategic focus to concentrate on Bahrain and the size of the subsequent local market are contributing factors to that decline.

But in general, since the turn of the century locally based airlines have been expanding their network footprints further and further to a point where every major city in the world is covered by at least one, if not two, carriers. 

Being exposed to a sudden loss of a service from a European airline can cause shockwaves in the expatriate community. But for others, for businesses, and the prospect of future investment opportunities, having control of the range of air services offered from the local airport is vital.

It is clear that locally based airlines in the Middle East now have a very firm grip on serving destinations in existing international markets, and for future development opportunities that is crucial.

At least from an airlift perspective, airlines in the region have taken control of their destiny and that must be good news for all local communities.

John Grant is partner at UK consultancy Midas Aviation