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Middle East airlines - Expanding fleets, performing well

Global Arab Network - Robert Bailey

Wednesday, 21 April 2010 23:17

Etihad_Airways_Middle_East_airlines_-_Flying_high

Despite the global economic downturn, Middle East airlines are consistently performing well and expanding their fleets. Robert Bailey looks at the many successes in the region

The International Air Transport Association forecasts that the Middle East will see the strongest passenger growth of any region over the next year. A predicted annual average growth rate of 6.8 per cent will be driven by GDP expansion, as well as a significant number of new routes being opened up and new capacity. Total international passenger numbers are forecast to be around 105 million by 2011, an increase of 30 million over 2006 levels.

According to John Matthews, managing director of Boeing Capital Corporation’s financial unit, the Middle East was the only region to see passenger traffic growth during the current downturn. Abu Dhabi International Airport, for example, recorded a 7 per cent rise in passengers in the first ten months of 2009.

Consistent passenger growth has underpinned confidence in the multi-billion investments being made in fleet expansions, as well as in the development of new airports in the region. These will add huge new passenger- and freight-handling capacity.

In the Gulf Cooperation Council (GCC) countries the expansion has been explosive. When the first phase of the New Doha International Airport (NDIA) in Qatar is completed in 2015, NDIA will be able to handle more than four times as many passengers as the city’s present international airport – and it will be able to accommodate the 550-seat Airbus A380, on order by Qatar Airways.

Abu Dhabi international airport is adding a third passenger terminal and a second runway, which will nearly treble existing capacity of 7 million to 20 million a year by 2011. Dubai’s gigantic Al-Maktoum International Airport at Jebel Ali envisages up to six 4.5km runways, one of which is completed, and the world’s largest airfreight terminal. Its commissioning date is uncertain, but it plans to handle 120 million passengers and 12 million tonnes of cargo a year.

In Iraq, Air France-KLM has an outline agreement to help renovate Baghdad airport’s third terminal, as well as to build new airports. Talks are in hand with Aeroports de Paris to design and construct a 6 million passenger annual capacity airport, to be known as Mid-Euphrates International, to serve Karbala and Najaf. Diwaniya governorate has sought international interest in building a new airport to the east of the city, 180km south of Baghdad, while in Kurdistan airport expansions at Erbil and Sulamania are nearing completion.

Tunisia’s recently commissioned Enfidha airport, 80km south of Tunis, is considered key to national development. It was constructed and is being managed by a Turkish Austrian consortium (Tepe-Akfen Vie) under a $618 million, 40-year build-own-transfer (BOT) concession, which also includes managing Tunisia’s existing airport at Monastir.

BOT schemes are being used to finance airport development in Egypt, notably on the country’s north coast, which is now opening up to tourism.

The region’s airlines are expanding despite global uncertainties. Predictions of multi-billion dollar financing gaps having to be filled by manufacturers have not materialised and market conditions remain manageable, according to both Boeing and Airbus. Boeing’s 2009 market outlook projects sales of $300 billion over the next two years to Middle East airlines, which translates into a need for 1,710 commercial jets. And the market is not limited to the big Gulf customers.

National carrier Tunisair, for example, is acquiring 16 new aircraft, comprising ten single-aisle Airbus A320s, three long-range twin-aisle A330-200s and three A350-800s. The commissioning of the A330s and A350s, which are still in development, will enable the airline to serve the North American market.

Iraq’s aviation services are being slowly reinstated with the help of foreign contract airlines, while Iraqi Airways, the Middle East’s oldest national airline, seeks to regain its place in the market. The airline has some 30 Boeing 737s on order, with the first due for delivery in 2015, and eight Bombardier short-haul jets. The airline also intends to purchase several of Boeing’s long-range 787s. However, security issues continue to impede progress on implementing bilateral aviation services agreements, notably with the UK.

Emirates Airlines’ phenomenal success has not been marred by Dubai’s financial woes. Group vice-chairman Maurice Flanagan announced, in late-November 2009, that there would be no trimming of the carrier’s huge order book. Dubai’s leaders were unlikely to cancel purchases, while Emirates continues to make money, he averred. Shortly thereafter, Emirates revealed it had secured $1.13 billion in financing, from Citigroup and Doric Asset Finance, for six A380 super jumbo airliners for delivery in 2010.

The airline has more than 50 A380s on order, more than any other international carrier, and operates more Boeing 777 twin-aisle long-range airliners than any other airline. It now flies to 102 destinations – more than any other Middle East airline – and ranks seventh in the world, by passengers carried, and sixth by freight tonnes carried

Emirates’ success has spurred other regional carriers. Qatar Airways recently secured two financing deals, worth $700 million, with five leading international banks for the purchase of four Boeing 777 twin-aisle long-range airliners.

Bank-rolled by the Abu Dhabi government, Etihad Airways has grown in the space of little more than four years into a major international airline, offering flights to more than 57 destinations in five continents. And it is still growing apace. It has barely started receiving deliveries in one of the largest commercial orders ever placed, worth up to $57 billion, for up to 205 aircraft and engines. The deliveries will quintuple the size of the airline’s fleet.

Passenger numbers, thus far, would seem to justify ongoing expansion. They increased 8 per cent in the first half of 2009 and Etihad expects to have carried close to 7 million passengers for the full year. Equally significantly load factors remained remarkably buoyant, falling a single percentage point to 72 per cent in the first half of 2009.

Etihad aims to become a significant contributor to Abu Dhabi’s economic diversification. A report prepared by the Oxford Business Group estimates that the airline will be contributing $4.9 billion to the emirate’s GDP by 2011, helping to support 84,000 jobs, and could eventually reach $7.6 billion, sustaining 140,000 jobs.

Smaller carriers have also been encouraged to scale up. Oman Air’s emergence as a transcontinental carrier will be heralded in April 2010 by the delivery of five wide-bodied Airbus A330s (to supplement the airline’s existing fleet of 15 Boeing 737s), which will allow for long-haul flights to Europe and Asia.

The fact that all six GCC countries now host national airlines seems to defy economic logic, given their combined population is less than 50 million. However, Dubai in the past ten years has developed into not only the region’s busiest airport, but also a leading international transit hub for Europe, Asia and Australia. It also has a reputation for being one of the world’s best-run airports, handling some 34 million passengers in 2008.

Global Arab Network

Robert Bailey is Global Arab Network consulting editor and writer specialising in the Middle East. his article is published in partnership with the Middle East Association

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