In bed with Etihad
The entry into service of Etihad's Airbus A380s at the end of 2014 was an opportunity for the airline to unveil to the public its very exclusive "Residence by Etihad". Designed to accommodate two passengers, this space offers the ultimate luxury in terms of comfort, with Etihad even evoking a flat in the air. In fact, it is a luxury cabin as you would expect to find on a cruise liner. The suite is divided into three parts: a lounge area with sofa and mini-refrigerator, a bedroom and a private bathroom, all designed by top designers working in the hotel industry. In-flight service is provided by a private butler, while on the ground a private limousine transfer to the aircraft is organised, in addition to a welcome in a private lounge. Etihad also offers the extremely comfortable First Apartment, a private cabin with an ottoman and a wide armchair that converts into a two-metre bed. Mini-refrigerator, 55 cm flat-screen TV and à la carte service are also included. The First Suite is the equivalent of this VIP space on Boeing 787 Dreamliners. Finally, the Abu Dhabi airline has redesigned its business class, renamed "Studio Affaires". A product that Etihad considers to be on a par with first class on other carriers. Functional and elegant, the "Studio Affaires" offers a 204 cm seat-bed with a massage function and direct aisle access for each seat. Each seat is also equipped with a 46 cm touch screen.
Lyon Saint-Exupéry airport is only dreaming of Emirates increasing its frequencies to Dubai. Since its arrival at the airport in 2012, the Dubai-based airline has already carried nearly 200,000 passengers between Lyon and Asia/Pacific on its five weekly flights. The same is true of Toulouse, where the airport management is lobbying the French government to grant traffic rights to one or other of the Gulf carriers. "For Toulouse, this would be a real opportunity to open up to Asia and a large part of Africa."explains Catherine Gay, the airport's marketing manager.
These expectations only serve to confirm the key role played by Emirates and Dubai, Etihad and Abu Dhabi, Qatar Airways and Doha in air transport today. Indeed, from these globalised hubs, 99 % of the world's major cities can be directly linked by non-stop flight. This is a staggering figure, and one that can only be strengthened by the expansion plans of carriers in this part of the world.
And they haven't been shy about it! After a rise to prominence that began in the late 1980s, the real acceleration came in the 2010s. In just half a decade, the Gulf airlines have become the equal of the world's biggest carriers. The strategies developed by Emirates, Qatar Airways and Etihad - to which we could also add Turkish Airlines and Oman Air - have all followed the same trajectory. The cornerstone of their strategy is to win over passengers and build up their loyalty through impeccable service. A strong argument reinforced, at least initially, by attractive fares.
Irresistible rise
The second stage in their irresistible ascent is the construction of a hub to serve the entire planet, including secondary destinations. The third stage is to strengthen the hub's global reach, but also the airline's influence, through the acquisition of other carriers or the creation of powerful partnerships.
Over the past decade, the economic climate has tended to be favourable for all the region's carriers, starting with the arrival on the market of new aircraft that have underpinned their desire to expand. The Middle East is Air France's field of choice - if not its sky! - for the Airbus A380. According to EADS, the consortium managing the Airbus development programme, 160 orders have been received there out of a worldwide total of 318. While Etihad and Qatar Airways took delivery of their first super-jumbos at the end of last year, Emirates is undoubtedly spearheading the influx of Airbus A380s into the region.
At the end of 2014, the airline alone offered 55 aircraft, making it the largest A380 operator in the world. The airline, which is still awaiting delivery of 85 more A380s, is not about to relinquish this position. The airline's development strategy is largely based on the integration of the super-jumbo, to the extent that a terminal in Dubai has been specifically designed for the needs of the giant aircraft. With an average of 490 seats, the European superjumbo has one major advantage: it can significantly increase capacity to the world's main markets, where airport saturation limits development possibilities. Emirates serves more than thirty cities by A380, with Dallas and Milan recently added to its network, as well as Perth in Australia.
The A380 Star in Paris
At Paris Charles de Gaulle, Emirates has been operating its three daily Airbus A380 routes since June 2014. As a result, the carrier dominates the Paris-Dubai route by a wide margin, representing a market share of over 80 %, with the rest being the preserve of Air France-KLM. The Airbus A380 is the real star of the routes between Paris and the Gulf, with almost 50 % of capacity offered on this route. In addition to the daily frequencies to Dubai operated by Emirates, Qatar Airways also launched its first Airbus A380 flights from Paris in November 2014, even adding a second route last January. And we can count on Etihad - which took delivery of its first Airbus A380 in December for the London Heathrow service - to position the aircraft on Paris, probably at the end of 2015 or early 2016.
For its part, the arrival of the Boeing 787 Dreamliner, with a capacity of 250 seats, enables the major Gulf carriers to deploy on routes with less traffic, for example from so-called secondary cities. The aircraft is also ideally suited to the fleets of smaller carriers such as Gulf Air, Oman Air and even Iraqi Airways. The former has placed an order for 16 aircraft, with first delivery expected in 2016, while the latter has ordered six for delivery by 2017. In total, according to Boeing management, the Gulf airlines have placed orders for some 150 Dreamliners.
The Airbus A350, whose economic performance will enable substantial fuel savings while offering unrivalled comfort, is now coming onto the market. And here again, it is the Gulf that is playing the pioneering role. The region as a whole is expecting delivery of 162 aircraft - representing a fifth of the aircraft in the pipeline - but it is also one of its representatives, Qatar Airways, which was the launch airline for the aircraft at the end of December. The airline promises that the A350 will offer more space, with a larger cabin and panoramic windows. This means more comfortable seats in economy class, with an average spacing of 46 cm compared with 43 cm on other aircraft.
The advent of the long-range Airbus A350 is considered by Qatar Airways CEO Akbar al-Baker to be the most significant development in the airline's fleet after the delivery of the Airbus A380s. In the space of just one year, Qatar Airways will have achieved a string of major firsts with, in addition to the delivery of the Airbus A380 and A350, the opening of the ultra-modern Hamad International airport in Doha in May 2014. These major events were preceded by another highlight: joining the oneworld alliance in 2013. At the time, Qatar Airways broke a kind of taboo in air transport by becoming the first Gulf airline to join a major global alliance.
It is also on the strategic front that the Gulf carriers have been most active recently. Little by little, they have established themselves as essential, if not unavoidable, partners for airlines experiencing financial difficulties or seeking to reposition themselves. Emirates and above all Etihad Airways have been at the forefront of major strategic mergers. In 2013, Emirates pulled off a masterstroke by convincing Australian carrier Qantas to sever its historic relationship with British Airways and join forces with it for five years, thereby capturing the key market of the 'Kangooroo Route' linking London to Australia. Passengers have thus swapped Singapore for Dubai and the British airline for Emirates for stopovers on the Australia/United Kingdom and Europe route. In Dubai, Qantas and Emirates now operate from the same terminal, with up to seven daily flights by Airbus A380. Above all, the synergies created between the two carriers mean that a dozen cities in Australia and New Zealand can be connected to some 35 cities in Europe from the emirate. An unbeatable choice...
In order to achieve a critical mass comparable to that of its Dubai-based neighbour, Etihad has also acquired stakes in other airlines. In just a few years, Etihad has acquired stakes in Airberlin, Air Serbia, India's Jet Airways, Switzerland's Darwin, Air Seychelles and, recently, Alitalia. The green light given by the European authorities to Etihad's entry into the capital of the transalpine airline will result in an increase in routes between Italy and Abu Dhabi. At the same time, more than 550 million euros will be injected to modernise Alitalia.
Etihad has thus created a real airline group, or what some observers are already calling the fourth "global alliance". Last October, the company set up "Etihad Airways Partners", which brings together five of these carriers around the Abu Dhabi-based airline. Although it denies any analogy with a global alliance, Etihad Partners will work to maximise their services with improved connections, joint initiatives in on-board and ground services and more effective coordination of frequent flyer programmes. "The potential of aligning our schedules to maximise our connections and our shared passion for high quality service is at the heart of the concept behind Etihad Partners."Etihad CEO James Hogan explained at a presentation last October. More recently, Qatar Airways has also entered the dance of strategic acquisitions, taking a stake of almost 10 % in IAG, the parent company of British Airways and Iberia. This should further strengthen the links between the airline and its partners in the oneworld alliance. But Qatar Airways should not stop there, as its Chairman declared in Berlin last March that the airline could not only increase its stake in IAG, but also invest in other airlines in order to diversify its sources of revenue.
Emirates' contribution to the European economy
Emirates' detractors notwithstanding, a report by European consultant Frontier Economics, published in March, demonstrates the positive impact of the airline on European economies. According to the study, Emirates' services have supported some 85,100 jobs on the continent, contributing the equivalent of €6.8 billion to the European Union's GDP. And that's without counting the deliveries of Airbus A380s to the carrier - Emirates is the leading operator of the superjumbo, with 57 A380s at the end of 2014 and an order for 83 additional aircraft - which generate an estimated contribution to EU GDP of €3.4 billion. They also guarantee more than 41,000 jobs.
Today, the airline flies direct to 28 cities in Europe, including 21 destinations in 16 EU member states. According to Frontier, the 199 other routes involve a single transfer in Dubai, and in most cases would require an additional stopover using another carrier. As a result, the connecting activity in Dubai alone guarantees 3,000 jobs, representing an impact of 215 million euros on the GDP of the old continent. This is an economic fact that is overlooked - or at least underestimated, according to Frontier - by those who speak out against Emirates' presence in Europe. "We've come a long way since our first route to Europe in 1987, linking Dubai to London Gatwick. Since then we have witnessed demand-led growth, which today enables us to operate more than 350 routes a week. By flying into markets that are poorly served by other airlines, we are helping to strengthen local economies."says Tim Clark, Chairman of Emirates. Emirates is optimistic about the European market. The airline expects demand for air travel to double over the next five to ten years, driven by new needs in trade, investment and leisure.
Powerful triumvirate
In a region dominated by the Emirates-Etihad-Qatar Airways trio, are the other airlines still finding room to position themselves? Gulf Air, the historic carrier, is the most vulnerable to the rise of its neighbours. As the various emirates and sultanates withdrew from its capital, the airline saw its operating bases shrink. Today, Gulf Air is refocused on Bahrain. At the end of 2012, the small emirate had to inject more than $495 million into restructuring the carrier. A measure that is bearing fruit, since after drastically reducing its network, the airline is once again in the expansion phase.
For its part, Oman Air is clearly aiming to become the fourth major carrier in the Gulf. To achieve this, it is in the process of repeating the successes of its sister carriers. Starting with barely one million passengers and a regional network in 2004, Oman Air carried more than five million passengers in 2013 and aims to transform Muscat into a real hub between Europe and Asia. At the same time, the airline has modernised its fleet with the delivery of new Airbus A330s at the end of 2014 and the entry into service of its first Boeing 787 Dreamliners in 2015. Oman Air has also overhauled all its classes, with its very recent Airbus A330s featuring a new business class with a 195 cm-long seat-bed. This strategy of moving upmarket is also the path chosen by Kuwait Airways, which has placed an order for 25 new Airbus aircraft.
From now on, only a few obstacles could limit the rise of the Gulf airlines, notably a tightening of the traffic rights granted by certain countries anxious to protect the interests of their national airlines. Canada and the Netherlands, for example, have officially blocked requests from carriers from the region. The French government is also reluctant to open up its skies too much, as shown by the wishes of Lyon and Toulouse, which have so far gone unheeded. The major American airlines are also lobbying to restrict the growth of these players, even accusing them of unfair competition. According to a white paper presented by Delta, American and United Airlines, Emirates, Etihad and Qatar Airways have received nearly 42 billion dollars in aid from their governments between 2004 and 2014, without which these carriers could not have benefited. Tim Clark, CEO of Emirates, was quick to respond that "The whole debate about what constitutes a subsidy, what constitutes fair or unfair competition, is just a diversion to mask the real issue, which is that the three largest US airlines, which already control two-thirds of international flights from the United States with their partners, want to further limit the choice available to American consumers."The tea towel burns...
What's more, with the recent fall in the price of oil, the expansionist ambitions of the Gulf companies could well come to a halt, at least temporarily. The fall in the price of a barrel of oil means lower financial revenues for the countries in the region, which will therefore have to cut back on their spending. Expansion plans could be affected, as could the flow of travellers to this part of the world. Just a bump in the road. Probably.
