Emirates, Etihad, Qatar: The Steady Rise of Persian Gulf Airlines

Every passing day, it becomes more evident that Persian Gulf airlines like Emirates Airlines, Etihad Airways and Qatar Airways are slowly taking over from traditional European carriers like British Airways, Lufthansa, Air France and KLM as the dominant forces in the international travel industry.  Where London, Paris and Frankfurt were the traditional change-hubs in the past, today Dubai, Doha and Abu Dhabi are taking over. The inroads made by the Gulf carriers has forced the likes of British Airways and Iberia on the one hand and Air France and KLM on the other to merge and consolidate, seeking to cut costs rather than struggle on alone.

Strategic investments by co-operative governments have given Emirates, Etihad and Qatar large fleets and huge airports. They have created a flourishing environment while established carriers languish. The point here is that the Gulf carriers are in the driving seat. They have the planes, the hubs, the connections and are opening up the new markets.  While Europe is worried about expanding their old airports, airlines in Gulf region are building whole global interchanges.

Over the past year alone, the Gulf airlines have expanded their investments and routes across the world. Etihad commenced operations in Nigeria July last year, thus offering strong competition to its fellow Middle-eastern carriers (and the traditional superpowers) in one of Africa’s most lucrative routes. But it is not only in emerging markets that they are expanding.

The same Etiihad, two months ago, announced that it is splurging $70m to secure three Heathrow airport slots at about the same time British Airways saw its profits wiped out.  The news so far this month has not been different but rather supports the projection that the traditional carriers need to evolve or risk being run out of business in the not-too-distant future.

Increasing Profits

In an industry that has already made a multi-billion-dollar global loss in seven of the last 12 years, with European airlines recording losses of around $1bn last year, Emirates   - three weeks ago – announced a 52% jump in profits. The Dubai-based airline’s fast growth outpaced rising fuel costs as it posted $622 million in net profit in the 2012-2013 fiscal year.

According to analysts, the fact that Emirates isn’t simply spending its way to growth but raking in the dollars too should make its rivals in Europe even more worried than they already are.

Etihad – which was established less than a decade ago – announced that passenger numbers had passed 10 million a year and it was turning increasing profits. Emirates, the UAE’s biggest airline, in February completed the opening of an entire 20-gate concourse at its Dubai airport base purely for its fleet of giant A380s, Airbus’s flagship aircraft, which typically carry 500-plus passengers.
And in Qatar, a new $15.5bn airport has opened with a runway fit for fleets of A380s. Qatar’s airport will be able to handle 28 million passengers a year after opening, but chief executive Akbar al-Baker is planning extension for 50 million by 2022, when the state hosts the football World Cup.

Better Services

The Middle Eastern airlines have found a way to distinguish themselves through quality of service. Qatar –which has won two consecutive Airline of the Year Awards, usually boasts in advertisements that it is the world’s only five-star airline. Etihad recently raised the bar by launching premium services for passengers that include bringing personal, on-board chefs into its first class cabin, and installing in-flight showers on their aircraft.

Emirates also offer in-flight hot shower facilities but are set to go further in creating a richer flying experience for costumers. The airline plans to add signature Shisha rooms to the list of things to do mid-flight. A Shisha is a traditional water pipe, known to most as a hookah.

The airline will allow passengers to pre-order their hookah/shisha before the flight via the on-screen menu. Passengers go to the lounge to enjoy their shisha experience after their meal. If the Shisha Room service trial goes well, they will be added to the entire fleet of A380s by the end of the year.

Competitive Pricing

Apart from new planes and the increasing importance of the Middle-east as a global hub, all three airlines are pushing the envelope when it comes to pricing. For example, a random search for an economy class ticket on online travel portal wakanow.com last week, to a location each in the western hemisphere (New York) and the east (New Delhi), threw up interesting results.

Emirates offered the cheapest fares, pricing below American carriers United and Delta as well as Arik, even though the Nigerian Airline has the advantage of flying non-stop.  Etihad was not far behind in offering competitive rates either, while there was no result for Qatar. Emirates fare was at least N100, 000 cheaper than any of the aforementioned European carriers.

All flights had one stopover though time spent connecting flights was not factored in. This usually is a consideration when choosing a carrier to fly with.

For the New Delhi route, the contrast in price disparity between the mid-east airlines and the European carriers is starker. Here too, Qatar offered the lowest price, which was less than half the price of a Lufthansa ticket and less than a third of what a British Airways ticket costs. All flights required a stopover.

Forging Stronger Ties

The possibility of a merger between any two of these airlines is not impossible. Qatar Airways CEO Akbar Al Baker has said he is “always open” to the possibility of an alliance with Emirates. “We are always open to an alliance with Emirates Airline,” Al Baker said while on a visit to Dubai recently. “I think now the closeness between Emirates and Qatar Airways will really make a very strong airline.

Despite the Doha-based airline announcing it is set to be fully integrated into the Oneworld alliance from September, Al Baker pointed to Emirates’ recent alliance with Australian rival Qantas as a clear example the Dubai airline was open to integration.

“You never know. Did you ever expect only one year ago that Emirates and Qantas would get together? Things in aviation can move fast. Integration of Emirates and Qatar Airways will benefit this region and will make the two airlines even stronger than they are today.”

Last year, Emirates’ President Tim Clark directly addressed Al Baker’s dream for a merger with the two airlines and said it was unlikely to happen, as it would have “seismic repercussions in the aero-political framework.

“You put the two together and you would face the most formidable international airline group that has ever been formed. That’s why it will never happen,” he was quoted as saying by Aviation Week.

However, at the launch of the Emirates-Qantas alliance, he seemed to be softening on the issue. “We’ll act on any opportunity where we see the partnership adding value. We can look at any partnership where the airlines’ chemistry matches, similar to the deal signed with Qantas. Anything is possible,” Clark was quoted as saying by Emirates 24/7.

Al Baker said he was interested in an alliance with Emirates because the Dubai carrier “is a very strongly established airline and have the network that would absolutely compliment the network of Qatar Airways.”

“There is certainly no rush - both Emirates and Qatar Airways are the world’s fastest growing full service airlines.

They know that whatever move they make, rivals will be shuddering with fear,” he said.