Key fact

Emirates has $66bn-worth of new aircraft on order to add to its existing fleet of 151 aircraft

Source: MEED

The aviation industry in the Middle East and North Africa (Mena) region experienced an unprecedented boom over the past decade, with the launch of six new airlines, three in the UAE alone. The growth in regional carriers mirrored the booming economies and changes in the global industry, with increased affordability of air travel driving demand. 

The gap between the big three [Emirates, Qatar Airways and Etihad] and other competitors is widening

Saj Ahmad, FBE Aerospace

In recent years, the Middle East has been the star performer in air travel growth. It was the only region in the world where international traffic increased during the economic recession of 2008-09. Middle East carriers have built up significant market share, with a 64 per cent share of capacity between the Middle East and South Asia, a 68 per cent share to Europe, a 77 per cent share to Southeast Asia, and an 80 per cent share to Africa.

Aviation competition increases

But while the Middle East’s aviation industry has outperformed other regions in recent years, the arrival of new players has intensified competition and left legacy airlines struggling to compete with younger carriers. This has created a widening gap in the industry between high-performing and ailing airlines.

The GCC airlines essentially fall in three groups: the leading airlines; the low-cost carriers and the struggling legacy carriers. The leading airlines include Dubai-based Emirates, Qatar Airways and Abu Dhabi’s Etihad Airways. The high performing low-cost airlines are Dubai-based Flydubai and Sharjah’s Air Arabia. The airlines that are struggling, include Kuwait Airways, Iraqi Airways, Iran Air, Saudi Arabian Airlines (Saudia) and Bahrain-based Gulf Air.

Passenger traffic, 2010 (million)
Emirates 31.4
Qatar Airways 14
Royal Air Maroc 10
Kuwait Airways 8.3
Etihad Airways 7.1
Air Arabia 4.5
Mahan Air 3.8
Oman Air 3.3
Royal Jordanian 3
Air Algerie 3
Nas Air 2.6
Jazeera Airways 1.3
Source: MEED

As flag carriers, these airlines enjoy strong government support despite being loss makers, benefiting from capital injections and special subsidies. Saudi budget carrier Sama Airlines was forced to ground its fleet in August 2010 after domestic fare caps and the denial of subsidies afforded to Saudia caused heavy losses. Privatisation is seen as the best solution to turn around the ageing carriers, with Kuwait Airways, Iran Air, Saudia all earmarked for sale. When it comes to fleet size, aircraft on order and passenger traffic, the clear leader across the whole of the Mena region is Emirates. The airline has $66bn-worth of new aircraft on order to add to its existing fleet of 151 aircraft. It reported a net profit of $1.5bn (AED5.4bn) for the financial year ending 31 March 2011, a 51.9 per cent increase on the previous year.

Established in 1985, Emirates has benefited from an early-mover advantage. But it is facing stiff competition from Qatar Airways and Etihad Airways, which were established in 1994 and 2003 respectively. Since 1999, when the Skytrax airline ratings system was launched, Qatar Airways has achieved a 5-star rating every year. Only seven airlines worldwide have managed to achieve this and is something Emirates and Etihad Airways have yet to achieve.

Financial results, 2010
($m) Revenue Profit/loss
Emirates* 14,560 1,500
EtihadAirways 2,900 na
Air Arabia 600 84
Jazeera Airways 156 -10
Oman Air 597 -203
Royal Jordanian 965 14
*=2010/11; na=Not available. Source: Airlines

“The GCC is a complex region in its own right, however the gap between the big three [Emirates, Qatar Airways and Etihad] and other competitors is widening,” says Saj Ahmad, airline and aerospace analyst at UK-based FBE Aerospace. “The only real threat to those carriers at a regional level is that posed by the growth of low-cost airlines such as Flydubai and Air Arabia, who have managed to grow rapidly with relative ease.”

Flydubai launched more than 20 routes in its first year of operation and carried 750,000 passengers. Air Arabia carried 650,000 passengers to 15 destinations in 2004, its first full year of operation. With their focus on short-haul flights, Air Arabia and Flydubai have eaten away at the market share of carriers elsewhere in the region. Their base in the UAE has also given them an advantage over other Middle East low-cost carriers, which have struggled to make profit, including the now defunct Sama Airlines. Rak Airways was forced to suspend operations for more than a year and Kuwait’s Jazeera Airwayshas  reported losses for the past two years.

Struggling carriers in the Middle East

Airlines based elsewhere in the region have not been able to keep pace with the growth of the GCC carriers, which have benefited from hydrocarbons-funded state investment.

The current political turmoil is likely to cause them to lose even further ground. Libya’s Afriqiyah Airways had ambitious plans for growth, as well as a merger with fellow carrier Libyan Airlines, amid the expectations of strong economic growth in the years ahead. The country’s airspace is now closed due to the civil war. Flights to and from Syria and Yemen have also been disrupted as a result of the 2011 Arab uprisings. Air Algerie and Tunis Air, which are also trying to reinvent themselves, have taken a hit from the slump in the Mena tourism sector.

Major Middle East and North African Airlines
Country Airline Established Destinations Existing fleet
Algeria Air Algerie 1947 68 28
Bahrain Bahrain Air 2007 23 8
Bahrain Gulf Air 1950 40 35
Egypt EgyptAir 1932 79 73
Iran Iran Air 1946 73 52
Iran Mahan Air 1992 28 36
Iraq Iraqi Airways 1945 15 15
Jordan Royal Jordanian 1963 58 28
Kuwait  Kuwait Airways 1954 46 14
Kuwait  Jazeera Airways 2005 22 11
Lebanon Middle East Airlines 1945 63 16
Libya Libyan Airlines 1965 30 13
Libya Afriqiyah 2001 30 13
Morocco Royal Air Maroc 1957 75 55
Oman Oman Air 1993 41 26
Qatar Qatar Airways 1994 100 97
Saudi Arabia Saudi Arabian Airlines 1945 90 137
Saudi Arabia Nas Air 2007 27 15
Syria Syrian Arab Airlines 1946 49 19
Tunisia Tunis Air 1948 53 31
UAE Emirates 1985 111 151
UAE Etihad 2003 67 57
UAE Flydubai 2009 40 8
UAE RAK Airways 2010 (relaunch) 5 4
UAE Air Arabia 2003 67 27
Yemen Yemenia 1961 39 14
Source: MEED

“Until the political turmoil settles, these airlines will struggle to keep afloat and it is likely, if not inevitable, that we see a number of operators collapsing,” says Ahmad.

It is unlikely the region’s aviation industry will witness such rapid growth again. As routes become saturated, the opportunities for expansion are lessened. Rather, the next few years will be focused on dealing with the legacy carriers and deciding whether they are worth saving.