Gulf carriers eclipse their global rivals

Middle East bucks world trend by posting airline passenger growth of 11.2 per cent as Etihad and Emirates gain from Asia and Europe.

New aircraft with state-of-the-art cabins, such as the Emirates A380, above, have helped to attract new passengers to local airlines.

Etihad Airways and Emirates Airline have won over new customers from rivals in Europe and Asia to help the Middle East record the world's strongest growth last year. The two airlines are among the fastest growing in the region, which added passenger traffic by 11.2 per cent overall last year. Middle Eastern airlines ended with growth of 19.2 per cent last month compared with December 2008, a report published yesterday by the International Air Transport Association (IATA) showed.

Their gains came at the expense of carriers such as British Airways, Lufthansa and Singapore Airlines, which are being forced to cede market share in travel between Asia and Europe to the Middle Eastern airlines, which have been offering competitive fares. "There is a real element of price competition," said Brian Pearce, the chief economist at the IATA. "The average fare fell further in the Middle East than it has in the industry as a whole."

While the Middle East includes more than 20 airlines from as far away as North Africa and Sudan, most of the capacity increase is due to Etihad, Emirates and Qatar Airways. All are in the middle of long-term expansion programmes, with hundreds of aeroplanes worth tens of billions of dollars on order from Airbus and Boeing. The big three fly to a total of 109 destinations on six continents, up from 104 cities as recently as last August, according to the online aviation website anna.aero.

Last year, Etihad expanded its fleet by 11 aircraft and launched eight new routes - Melbourne, Asana, Istanbul, Athens, Larnaca, Chicago, Cape Town and Hyderabad - for an overall capacity increase of 18 per cent. By contrast, worldwide capacity fell by 0.7 per cent as airlines in other regions temporarily grounded aeroplanes and sent staff on furlough to cope with the decline in demand. There was a worldwide decrease of 3.5 per cent in traffic, in a year marked by the scars of the global recession, the spread of the H1N1 global pandemic and another attempted airborne terrorist attack on Christmas Day. The declines are the sharpest since the Second World War.

"In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen," said Giovanni Bisignani, the director general and chief executive of the IATA. "We have permanently lost 2.5 years of growth in passenger markets and 3.5 years of growth in the freight business." Besides the Middle East, only Latin American airlines managed to see rises in traffic, but by a mere 0.3 per cent for the year. Worse off was Asia-Pacific, Europe and North America, which posted declines of greater than 5 per cent each.

In the Middle East, a small but growing crop of budget airlines also performed strongly last year, helped by a trend for passengers to buy cheaper fares than they would have before the global downturn. "Passengers are moving from the front of the plane to the back to the cheaper seats, and to low-fare airlines," said Mr Pearce. This trend has hurt travel agents as passengers have booked their fares directly from the budget carriers, said Mary Thomas, a director with Bin Moosa Travel in Abu Dhabi.

"When customers switch down, travel agents have been the losers," Ms Thomas said. In the air cargo category, the region's airlines also posted gains of 7 per cent, while globally demand is still 9 per cent lower than its peak in early 2008, the IATA said. "The industry starts 2010 with some enormous challenges," Mr Bisignani said. "The worst is behind us, but it is not time to celebrate. "Adjusting to 2.5 to 3.5 years of lost growth means that airlines face another spartan year focused on matching capacity carefully to demand, and controlling costs."

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