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22.09.2022

Passenger at all costs

Hello, Letundra is in touch!

The hot summer is over, we have turned over the calendar, and life is boiling in the East: tourists are accepted, the housekeeper’s chairs are dressed in silk and fans are waiting for the World Cup. The Persian Gulf states are really solvent and attractive for investment. Despite the oil fields profitability, governments are not limited to the resource economy, they invest in tourism and, traditionally, in aviation.

In fiscal year 2021-2022, Emirates carried 19.6 million passengers, Qatar Airways — 18.6 million, Saudia — 11.6 million. Etihad made a record profit in the first quarter, as did Air Arabia, which earned 122 million in the same period… However, is everything so wonderful? Despite the chic and oriental luxury, a problem is brewing the markets’ redistribution and fierce competition. The split in positions on oil production volumes aggravates the situation.

The Saudi prince decided to invest in the aviation development, according to various sources, from $100 to $147 billion to buy 250 aircraft for the low-cost airline flynas alone, and 30 billion to create a premium airline. There are also talks about creating a tourist zone the Belgium size with the entire necessary infrastructure. Saudi Arabia has prerequisites for optimism: this year the demand for tourist services has doubled.

The market redevelopment was started by Qatar, the upcoming World Cup venue. Several smaller players use the idea: Oman Air puts 48 flights from Doha to Muscat and back on match days. Air Arabia and Kuwait Airways use the same scheme. The championship organizers expect one and a half million fans, so the shuttles launch from neighbouring countries is necessary.

Such activity casts a shadow on Emirates’ leading position. Moreover, their fleet does not allow them to fit into the concept: A380 double-deckers are needed with sides such a concentration in Doha, like a behemoth in a theatre.

Flydubai (Dubai) flies from the UAE to Qatar up to 33 times a day, Qatar Airways 15 times a day, Etihad (Abu Dhabi) – 42 times a week, Air Arabia (Sharjah) — 14 per day during the championship. There is no information about Emirates shuttles. Thus, we can conclude that the Dubai flagship strategy, to return 118 double-deckers and fly far, far away, where few people can afford, was forced. Less spacious aircraft deliveries have to wait for several years, and we have to promote the affordable luxury segment — so that half a thousand seats on board are not empty. A hint to the company’s shareholders about dividends next year in an interview with Bloomberg from the company-outgoing president looks strange.

An interesting solution on the World Cup eve in Qatar was the multiple-entry visas for fans offered by the UAE, Oman, and Saudi Arabia. Any tourist with a Hayya card required for access to stadiums can get a visa and stay in the Gulf countries for up to three months.

After the championship, a multiple increase in passenger traffic is not expected in the Middle East. From 2010 to 2020, the market grew by 8.5% annually an average, now 18% is planned. Everyone has the right to an opinion.

WizzAir wants to add 20 new routes from Europe to Saudi Arabia to the existing base in Abu Dhabi. They are probing the market, have put three directions on the schedule, and are looking for investor support. For passengers, the offer is still of little value, but the test phase can improve it.

Saudi Arabia itself is airlines stimulating the work on unprofitable routes, plans to develop the capacity to 330 million passengers by 2030, including 30 million transit passengers, and wanted their own World Cup by applying for 2030 jointly with Greece and Egypt.

Qatar is constantly upgrading its airport. They are preparing to serve 65 million people a year. Probably, Finnair, which has abandoned long-haul flights in delivering Scandinavians favour to Doha, will help with this.

Another contention bone in the region is relations with Israel. Not everyone is happy with their warming. As soon as the first Palestinians took off on a flight from Israeli Ramon, the alarm was sounded in Jordan and an ultimatum was issued: fly only through us or do not return. At the same time, Tel Aviv faced the fact that Iran is lobbying to keep Oman’s airspace closed to Israeli airlines. The Syria’s Aleppo airport shelling exacerbated this confrontation. Egypt, on the other hand, has opened a new Sharm el-Sheikh to Tel Aviv route, not the least of which was a visit by the US president.

Serious shifts are planned in tourism and aviation in the region. I would like to think that competition will reduce prices, but few people believe in fairy tales. Time will tell whether the Arab brothers will fight peacefully at such rates.