TOWARDS AN UPHEAVAL IN THE GULF?

29 May 2023.

We must follow the news in this part of the world closely because it seems that major maneuvers are being prepared. The 3 major carriers in the region: Emirates Airlines, Etihad Airways, and Qatar Airways are, it seems, reviewing their strategy and relations. And this will certainly weigh without global air transport because we are dealing with essentially international operators, for whom, unlike the American, Chinese, and even Indian situation, the domestic market is almost nonexistent.

Emirates Airlines is undoubtedly in the lead. Created in 1985 with 2 Boeing 727 leased, the Dubai carrier has taken an undisputed leading position thanks to an unchanged strategy that has consisted in offering foreign markets an unparalleled quality/price ratio, all supported without fail by its shareholder the Emirate of Dubai which has not hesitated to provide its carrier with all the airport facilities necessary to achieve its objectives. At the last known results, Emirates has a turnover of $32.6 billion with a net profit of $3.2 billion or 10% of turnover. This remarkable performance is to be credited to its management unchanged for more than 20 years with a Chairman of the group Sheikh Al Maktoum and the CEO of the company Sir Tim Clark. This stability is one of the main reasons for the company's prosperity. Its fleet consists of only two types of aircraft: 120 A380 and 145 Boeing 777. The unfortunate shutdown of the A380, despite Sir Tim Clark.s incessant promptings with Airbus, led Emirates to switch a large part of its future orders to Boeing with only, one would say, 50 A350 against 126 B777 8 and 9 X and 40 B787.

Qatar Airways, which left 9 years later in 1994, immediately positioned itself as a frontal competitor of Emirates with the same strategy and the same support from its government. The stability of its management is also remarkable, the company has known only one President, Sheikh Al Baker. Still, its size is much smaller than that of its main competitor and its results remain uneven. The latest known ones report a turnover of $14 billion and a loss of $1.9 billion. Nevertheless, here is an operator with which it will be necessary to reckon with its 212 aircraft divided half between Airbus and Boeing. The country went through a very difficult period following the closure of its borders with its immediate neighbours in June 2017. Their reopening in January 2021 is undoubtedly a sign that aviation relations will evolve in the Gulf.

Finally, Etihad Airways, launched in November 2003 not to let Emirates occupy the leading position in the Emirates while the capital is Abu Dhabi, has never really been able to find its place. Starting too late, it tried to compensate for its size difference by taking stakes in all the carriers in difficulty to present a balance sheet of the same size as that of Emirates. This is how it took very important shares in 8 operators, none of which had decent financial health. They were also of an entirely different culture. Nothing common in the management methods of AirBerlin and Jet Airways or the Serbian JAT Airways, not to mention the Seychellois or Australians. Instead of getting stronger, Etihad Airways ruined itself. Since then, it has struggled to recover from the $7 billion in losses accumulated between 2016 and 2021. This has also resulted in successive changes of management: 3 presidents in 6 years, which does not make management easier. It should be noted, however, that the Abu Dhabi carrier still has a turnover of $ 9 billion, that it operates 86 aircraft to 130 destinations and that it has ordered 48 Airbus including 22 A350 plus 38 Boeings, all long-haul.

The situation seemed frozen for many years, but it seems that this is changing. First of all, we see the two Emirates companies getting closer, starting with the signing of powerful Interline agreements.

This could presage a future merger that could start with a "Joint Venture" related to certain types of traffic. And then the big Saudi neighbour moves very quickly. 2 new companies are emerging from the sands and they seem to have a considerable war chest. But at the same time, Qatar finds good reasons to return to Saudi Arabia. The new Saudi Arabian companies Ryad Air and Neom Airlines will need expertise that may well be provided by Qatar Airways.

In short, it would not be surprising if the cards were quickly redistributed in this part of the world, and this will have consequences for all international traffic on the planet.