Gulf airlines have double advantage, says Swiss airline chief

Speaking at the AGM of the International Air Transport Association in Doha.
Director general and CEO of Iata, Tony Tyler. FAISAL AL-TAMIMI / AFP
Director general and CEO of Iata, Tony Tyler. FAISAL AL-TAMIMI / AFP

Arabian Gulf carriers benefit from an aero-political strategy that their European counterparts lack, according to the chief of the Swiss flag carrier.

Such political support and access to capital give them two key advantages over European carriers struggling amid cut-throat competition.

“The Gulf carriers have a fantastic situation because they have a government which is following an aero-political strategy, which is missing in Europe,” said Harry Hohmeister, the CEO of Swiss International Air Lines, on the sidelines of the annual general meeting of the International Air Transport Association [Iata], in Doha yesterday.

“Then of course they have a lot of capital available This is a second advantage they have. Therefore, they are of course performing with high growth rates, which of course are not related to the market itself,” he added.

Gulf carriers including Emirates Airline and Etihad Airways are adding European routes amid rising competition between carriers from the region and beyond. At the same time, emerging aviation hubs such as Dubai, Doha and Abu Dhabi are picking up increasing market share at the expense of more established European hubs, including London Heathrow and Paris Charles de Gaulle.

Tony Tyler, the chief executive and director general of Iata, said in his speech yesterday: “The expected shortfall in European airport capacity is so serious that by 2035 we could see a 12 per cent gap between demand and infrastructure capacity.

“The Gulf governments have understood and acted upon the industry’s need for airport infrastructure. Airports here rank among the most impressive in the world.”

Etihad, which is moving towards a deal to acquire a stake in loss-making Alitalia, has rapidly expanded its reach by its strategy of equity alliances.

Under the strategy it has taken stakes in a number of struggling airlines including Aer Lingus, airberlin, Air Serbia, Air Seychelles, Virgin Australia, India’s Jet Airways and Switzerland’s Etihad Regional, formerly known as Darwin Airline.

The equity alliances helped to lift profits at the carrier by 48 per cent last year, with revenues from its partners now accounting for more than a fifth of passenger revenues.

But the strategy has also provoked comparisons to the ill-fated “hunter strategy” of Swissair during the 1990s, which led to rapid expansion but ended in the grounding of the airline in the wake of the 9/11 attacks in 2001, which triggered a major slowdown in global travel.

“Etihad is following a totally different strategy. Emirates is doing it by their own. Etihad is having a different strategy by purchasing carriers in international markets. Which one is the right one? We will see in 20 years,” said Mr Hohmeister.

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Published: June 2, 2014 04:00 AM


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