A rapid lift-off for Gulf airlines pays dividends

From Abu Dhabi to Dubai and Doha, airports and carriers in the region have focused on aggressive expansion programmes and the acquisition of cutting-edge aircraft to build large long-haul fleets, which has seen operators move swiftly to the top of the aviation industry heap.

As the UK's Farnborough International Airshow, which begins tomorrow, puts the spotlight back on Gulf airlines and their anticipated order announcements, the size and scale of their rapid growth and global ambitions has become apparent.

Emirates Airline is now the largest in the world by international seating capacity, according to the latest annual report by the International Air Transport Association. The Dubai-based carrier jumped four places to number one in international scheduled passenger kilometres (SPKs) last year. SPKs are a key metric in the industry, representing the number of seats multiplied by distance flown . Emirates notched up 118.28 billion SPKs last year, pipping Lufthansa's 118.26bn.

Emirates's ascent is remarkable given its standing a decade ago. The airline was 24th among international airlines in 2000. Qatar Airways and Etihad Airways, which have similar business models, are not far behind. The two are the 19th and 24th-largest international airlines by international capacity, respectively. With small populations in their home countries, these carriers have succeeded largely due to new long-range aircraft and pro-growth policies supporting airport development.

Since Emirates added twin-engine 777s to its fleet in 1996, aircraft technology has played an important role in the success of these airlines. They have flourished as Boeing and Airbus introduced aircraft able to fly a dozen hours or more through drastically improved fuel efficiency compared with older models. Emirates is the world's largest operator of the 777 with 78 of the planes that serve as the backbone of its fleet. The 777 outperforms the older Boeing 747 flown by rivals such as Qantas and British Airways on routes between the UK and Asia, says Tim Clark, the president of Emirates.

"They have 303 seats, while on our 777-300ER we have 354 seats, so we can carry about 50 more seats and the aircraft burns up to 30 per cent less fuel and, actually, the payload is better on certain routes," he says. Such aircraft have played a large part in earning Gulf airlines the reputation of being able to get anywhere in the world with just one stop. There are now well over 100 destinations on six continents that are connected to either Dubai, Doha in Qatar or Abu Dhabi, including Buenos Aires, Sao Paulo, Johannesburg and Beijing. With their hubs located at the centre of the Asia-to-Europe flight path, Gulf airlines have been able to link up the major metropolitan centres of the world with just one transfer stop via their home airports.

On flights from Houston to Chennai, Qatar Airways offers an eight-hour advantage in travel time over the US-based Delta Airways by transiting via its hub in Doha. Delta code-shares the route with the India-based Jet Airways and the journey requires two plane transfers. Similarly, Etihad's service from Manchester to Melbourne is more than three hours quicker than the Qantas and British Airways code-share flights. Their flights require two plane changes instead of one for Etihad.

Gulf growth has been of huge benefit to the airports that serve the three carriers in Dubai, Abu Dhabi and Doha, with all of them almost doubling in traffic between 2004 and 2008. Dubai International Airport is now the fourth largest in the world by international traffic. By contrast, other airports in the global top 10 grew by much smaller margins over those years. The profits generated by Emirates and Dubai's other travel-related entities, such as the airport, duty free, ticketing and baggage handling companies, is of major importance to the emirate's economy.

"Dubai is the only place in the world that aviation pays 25 per cent of the entire finance budget," said Mohammed Ahli, the director general of the Dubai Civil Aviation Authority. Mr Ahli said the emirate was committed to continuing air travel improvement and an open skies policy of unrestricted access to Dubai airports by foreign airlines. To that end, the country's second major facility, Al Maktoum International Airport, began operations last month

"We opened the [Dubai International] airport that was considered to take us for the next 50 years in May 1971, but it took us only to 1976 when we asked Sheikh Rashid [bin Saeed Al Maktoum, the then ruler of Dubai] that we need another airport. We were in constant need of manpower," Mr Ahli said. Airports in the region are preparing even more capacity expansion in line with the anticipated growth of the three Gulf airlines, which are making multibillion-dollar gambles for the Airbus A380, the largest commercial airliner. Emirates has ordered 90 A380s, with Etihad to receive 10 and Qatar Airways's five planes.

The aircraft offers the lowest operating costs per passenger, says Sir Maurice Flanagan, the founding chief executive at Emirates and currently its executive vice chairman. "I can't understand why other airlines have been slow to pick up on the A380," he says. * with Bloomberg [e-mail]