November 11, 2013
Credit: Royal S. King/Airlinersgallery.com
Competitors of Emirates, Qatar Airways and Etihad Airways have to dig deep into capacity statistics to find markets where the mighty Persian Gulf carriers are not succeeding. The good news is that there are some, but the bad news is that where it really counts, these airlines' growth rates are still frightening to the rest of the world.
An analysis of Persian Gulf carriers' capacity deployed over the past several years shows—not surprisingly—that they are adding huge numbers of seats in markets where they can obtain traffic rights (see graphs). On the flip side, governments in various parts of the world are still using restrictive bilateral air-service agreements as relatively effective tools to inhibit the Persian Gulf carriers' expansion, although countries with fast-growing markets—such as India and China—appear to have changed their strict policies.
A closer look into where the “Big Three” airlines are growing also shows that it is not only European and Southeast Asian carriers that have reason to worry about their long-haul margins, but also U.S. airlines. Emirates now has as many seats on these ultra-long-haul flights to the U.S. as it offers to Germany, which is obviously much closer.
There are only a handful of markets in which the Persian Gulf carriers' expansion plans are not working, shows an Aviation Week analysis of data provided by Innovata. Arguably, in many cases, that may be linked to the political situation in these countries rather than any flaw in the airlines' business models. Traffic has been stagnating or declining in markets such as Lebanon, Malta, Sudan, Uganda and Yemen, but all of these are very small.
The three most challenging markets for the Persian Gulf carriers are Turkey, Ethiopia and Canada. Emirates has halved capacity into Addis Ababa, Ethiopia, since 2009, Etihad does not fly there at all and Qatar has only just started to do so. Ethiopia is one of the few African countries that has a very strong flag carrier, Ethiopian Airlines, as does Kenya, with SkyTeam member Kenya Airways. Emirates' capacity growth has only been around 25% over the past four years—the airline had been achieving such figures typically in one year. Etihad has only just started flying to Kenya, but the market seems to work best for Qatar, which has doubled capacity over four years, albeit on what is still a modest level.
Turkey has also been a difficult market, although it is one of the region's largest economies and has a very large population with growing average disposable income. But Turkish Airlines has long posed a very strong threat to the Persian Gulf carriers' ambitions, particularly in Eastern Europe and Africa, and it has been very effective in protecting its home market.
Only Ethiopian and Turkish airlines seem to have shown much ability to cope with the competitive threat. For Canada, it is simply the lack of additional traffic rights being granted that protects Air Canada.