View Full Version : Middle East airlines 'unstoppable'
12th Mar 2012, 13:55
Interview with Thierry Antinori of Emirates:
Middle East airlines 'unstoppable' | Reuters (http://www.reuters.com/article/2012/03/12/uk-emirates-idUSLNE82B01D20120312)
I agree with his point of view.
12th Mar 2012, 15:38
Just want to say that there is always a rotation in this industry. Go back 5-10 years and in the US, JetBlue was all the rage. New planes, advanced AVOD, simple ticketing. But while all of this works when you are young, as you age a number of things happen:
Need to handle more involved and random maintenance as fleet ages
Costs rise as need to pay more for maintenance and employee benefits as the airline ages.
Scheduling and ticketing becomes more complex.
Honeymoon with the press fades as instances of unfortunate service begin to come to light.
I could go on, but the moral is, nothing lasts forever. The ME airlines are "hot" right now, but it is likely a phase. Of course, whether the legacy airlines will still be alive when the phase ends so they can take advantage of the then more equal situation is another question. :rolleyes:
12th Mar 2012, 16:34
Intresting article and as PAXBOY says what is there to disagree with in it. If you look at European rivals there are none with the service levels you get from EK or the Far East airlines eg SQ. I do use LH on some trips (just come back from Houston with them) but in comparison with EK there service is not nearly high enough although planes are newer than BA. You can see what is happening with the decline in passenger numbers on the long haul routes from London going East by the legacy carriers, which I would have thought stems from the rise of gulf carriers flying to the regions. I do not know how Mr Walsh etc will counter this other than govt protection like in Germany / Canada, as I have not heard or seen any improvment in product yet.
12th Mar 2012, 23:26
I agree, SeenItAll, the ME carriers are now flavour and going to be so for another 15 years or more.For the European legacies, who have seen their short haul ops swept away - much of their long haul market is now going to grabbed too.
As I have said before, much more pain in Western Europe airline world still to come. As I have also said before, I say it with no pleasure - but it is real life.
13th Mar 2012, 00:55
when you are young, as you age a number of things happen:
Your relative fuel costs will also rise as rivals renew fleet.
I'd be interested to see where we are in 15 years. Gulf states can offer keen terms for their airlines as they don't have to levy corporation or income taxes, but it isn't all rosy as education and health costs still have to be paid for. In the longer run, oil revenues will fall off (Dubai already is a trading city, not an oil producer) - and alternative fuels will be found. This may mean these economies move closer to western taxation models, but for now they still have a huge head start.
I see point to point flying for longer haul routes becoming the realm of the wealthier passenger, with the cheapest fares only being available with a change - in a way which is even more stark than what we have now. Ironically of course, the short haul flights will still be dominated by point to point.
13th Mar 2012, 08:31
I think it's going to be a bloodbath when the novelty starts to wear off and cheap fares fail to attract.
There will be declines in profits, followed by declines in service levels. Some of those carriers, now riding the crest of the wave, are going to have difficulty financing fleet renewals and growth. Political stability, or lack of, is going to cause passengers to think twice about using ME routes, and a lot of people are realising that living in the ME is not a glamour posting, it's moving slowly to the other end of the spectrum, a hardship posting. It will become increasingly difficult for the ME carriers to attract top management and for that matter flight deck and CC too. We only have to look at the rumbles of discontent expressed on Pprune to see this, although they may only represent a minority view, it's one that is growing.
Passengers will resist the increased journey times which travelling via the ME entails on some routes, and the unpleasant transit conditions at the hub airports. I know a lot of people, both in a personal and professional capacity, who have been loyal ME carrier supporters for several years and are moving back to other routes particularly as some European carriers offer competitive fares on connecting routes, so whilst a LON-BKK may not be cheaper than a ME carrier, a MAN-AMS-BKK might be.
Emirates was the first to expand and become overwhelmingly successful. Others followed and became successful to varying degrees but this is probably not sustainable as longer established carriers from other parts of the world will rethink their strategies and fight back against the upstarts.
Also, as jabird says, the ME carriers will not always benefit from friendly tax regimes.
Whilst I don't exactly expect the sandpit to become the next aircraft graveyard, I do think there is going to be some significant shrinkage and I can see the transit halls at DXB, for example, starting to resemble that massive echoing mausoleum which is T4 at Madrid.
13th Mar 2012, 10:30
and cheap fares fail to attract.I agree with your analysis, with the exception of the above quoted.
My entire experience of aviation tells me that cheap fares dominate: Whatever we might wish to be the case, especially in terms of service, price is apparently all that matters to the overwhelming majority. If we learn nothing else from the global success of the LoCo's, it should be this?
13th Mar 2012, 12:11
I agree in general Tightslot. However, there is a glimmer with products like World Traveller Plus. Now, I accept there is an element of downgrading from Business which contributes to the success of WTP products but having used it and looked around the cabin I reckon my wife and I are not the only escapees from economy.
13th Mar 2012, 12:30
Loved this from the article ....
"We do not lose time in discussion with alliances, which are not very clear for the customer to understand. They say 'we offer you seamless travel' but in the end they offer seamless trouble,"
13th Mar 2012, 12:55
I agree that 'PE' cabins are good for those that can afford to upgrade or have to downgrade but - they are only a thin layer of financial icing for the carrier.
Overall, I think the points raised here very reasonable but another ten years of strong competition? That will be sufficient to polish off a few carriers before the tide turns. Of course, if the ME does become politically unstable, then all bets are off.
13th Mar 2012, 21:42
I don't think anyone would deny that the Middle East carriers are a competitive threat. There is plenty of evidence of that with the decimation of Qantas's market share in the Australia - Europe market.
However, from a UK centric market point of view, in markets such as London where there is a huge O&D market, particularly westbound across the atlantic, the likes of BA are still going to maintain a strong position in the markets. And business travellers generally prefer direct rather than indirect routings. Other carriers that do not have the luxury of a large O&D market on their own doorstep are going to struggle.
Also, the passenger feedback for EK is hardly overwhelmingly positive. The lack of consistency in the hard product is a particular source of complaint.
14th Mar 2012, 19:45
Of course, if the ME does become politically unstable, then all bets are off.
I remember an introduction to that part of the world when my dad spent a year working on the Asir region of Saudi Arabia. He believer the world's two biggest powerkegs were there and Japan - the former due to religious intolerance, the latter because of their work culture.
He's got many things right, but Saudi has stayed remarkable stable so far. I think there is also a sufficient security presence to keep order in the UAE, not to mention that most people are there as guests, and they know that upsetting the authorities will only earn them one set of points on the Emirates loyalty scheme!
How about another scenario evolving over a slightly longer time line:
* Already, TK are becoming a major player, with a growing network of regional routes. A bit of a hybrid between Europe & the ME, but certainly one to watch.
* Egypt has always had a sizeable middle class. Any change of another carrier emerging from there?
* Afriqiyah was supposed to play on TIP being a major hub for Africa. My brother in his infinite wisdom booked a LOS-TIP-LHR routing for his father in law last year just as Tunisia and Egypt were kicking off, thinking "of all the north African leaders, Mad Dog will be the last to go...."
*Saudi is still going through a reform process, if only at a glacial ace. RUH, the largest airport in the world at the time, certainly has the room, but now SV are only a niche player. Saudi is still the largest market on the Arabian peninsular, so there is o&d demand too.
Now dare I get really bold and point out that Iraq and Iran too have young populations, and in Iran in particular, they are often well educated too. I can't say Tehran is high on my travel wishlist, but Lonely Planet had a great description of the Friday "Death to America" marches, when students would turn round and see a Westener, go over and be genuinely friendly and welcoming towards them!
Looking further east, Pakistan and India should also both be natural transfer points for the rest of Asia, and why not the Kangaroos too? Instead of course, this must surely be where the lion's share of EK's market - from UK regionals in particular - ends up. Now if they got organised, that might be a much bigger threat to EK / EY / QR than the other internal challenges they face.
16th Mar 2012, 10:37
Middle East carriers also have geography on their side.
The UK - Oz market is about 3m single journeys p.a. (c0.9m Australians vising the UK & x0.6m the other way). A reasonable proportion will live outside the South East and they have a one stop service to SYD, MEL, BNE & PER, something not offered by othe carriers. (SQ's MAN flight now stops off at MUC.)
Flights to the Indian sub-continent will be as quick as travelling via LHR. (You can argue as to which of LHR, DXB, DOH or AUH offers the best transfer service.)
The last time I checked there were seven daily flights to the ME from Manchester (EK x 3 incl an A380, EY/'QR x 2) whilst EK has a further four flights from regional airports (BHX x 2, NCL & GLA).
EK also operates 3 x faily from LGE - very useful for those living south of London.
Services are also starting from DUB together with a number of European regional airports.
The UK APD for a family travelling to Oz id very high. It is relatively cheap to take the ferry to the Netherlands. I don't know about the cost of long term parking at Schiphol but could be a lot cheaper to fly out of AMS.
Then of course little or no tax is charged either on salaries or profits in the ME with public expenditure financed from oil & gas revenues. (Less true for the Emirate of Dubai rather than Abu Dhabi or Qatar.) This does give the ME carriers a cost advantage.
However as other posts have said, the Europe - ME /Asia market is finite and as new non stop routes are started the share of the ME carriers will stop rising. A few years ago SQ was growing exponentially, its growth is far more modest now. The rate of growth has to slow at some stage.
16th Mar 2012, 11:46
The statement 'the rise of the ME carriers is unstoppable' means 'for the medium term'. The expansion has been in Western Europe and North America, now it is in the Middle and Far East.
The centre of expansion will continue to move but, at each move, it creates winners and loses. Just like the expansion of motor car construction is moving too.
16th Mar 2012, 13:29
I presume Paxboy when you say PE cabins are good you are excluding BA from that statement. As someone who has endured BA's Premium Economy offering over the last couple of years I can assure you compared to the competition it is far from good. I believe the word a fellow passenfger used to describe it recently was 'appalling'.
16th Mar 2012, 16:50
I have only used the BA WT+ (=PE) cabin on one round trip LHR/JNB and found it acceptable but not as good as another UK carrier who is my preferred for long haul . However, on those trips, the cabin staff were very good and my diary tells me it was August 2009.
17th Mar 2012, 21:09
Your probably right paxboy I believe it has deteriorated a lot over the last couple of years