Contributor - Middle East

Peter Shaw-Smith

Delays to major new airliner programs continue to hamper plans for fleet renewal at Middle Eastern carriers. Since the outbreak of Covid, the region's fleets have remained static but as demand for air travel approaches pre-pandemic levels, one might anticipate an increase in new orders as 2023 draws to a close.
For instance, as of October 12, Emirates flew 260 aircraft—119 Airbus A380s and 144 Boeing 777s, including 123 777-300ERs and 11 freighters. Back in September 2019, Emirates operated 268 aircraft and awaited delivery of another 231.
Qatar Airways now has accumulated about 255 Airbus and Boeing aircraft and awaits another 195 on order, while Etihad Airways’ fleet consists of 90 aircraft from the same airframers, with a further 105 units on order. According to Rob Morris, global head of consultancy with Cirium, delays to the 777X program represent a key to fleet replacement, if not expansion, at the region’s major airlines.
“Fleet growth at Emirates, Etihad, and Qatar is inextricably linked to the 777X and A350 programs,” he told AIN. “The timeline for certification of the former remains uncertain and the A350 backlog at all three typically includes small scale in 2024 with concentration from 2025 onwards. Hence, fleet growth is likely to remain limited until greater progress is evident on the B777X.”

Dan Taylor, head of consulting with IBA, said that Middle East commercial passenger air travel broadly had returned to pre-Covid levels, despite some significant global headwinds affecting the industry.&nbsp;
“Airlines are facing unprecedented challenges including high oil prices, supply chain delays and cost inflation, continuing geopolitical instability, and elevated interest rates,” he told AIN. “On the positives, airlines have been able to successfully increase fares as demand for air travel remains strong for now. Delays at the OEMs are having a knock-on impact on airlines’ ability to grow capacity at expected rates, but the production volumes are set to return to 2018 levels by mid-2025.”
With an expected available seat kilometer (ASK) growth of five percent per year forecast for the next five years, airlines have accumulated a large order backlog to both support the growth and to replace aging aircraft, Taylor believes. There are currently 1,169 commercial aircraft on order for Middle East operators; the largest backlog resides with Emirates, which carries orders for 120 Boeing 777s, 30 Boeing 787s, and 50 Airbus A350s, Taylor explained.&nbsp;
<h2>&nbsp;</h2>

<h2>Big Two OEMs Struggle to Support Growth</h2>
According to Richard Aboulafia, managing director of AeroDynamic Advisory, Emirates needs to replenish its fleet but delays have confounded that plan. “Everyone else thinks smaller is beautiful: the A350, the B787, and, in Qatar’s case, intriguingly, A321s. When you talk about the challenge and the importance of scaling down and being more flexible in your route network with smaller jets, it really hits you just how badly the aircraft delivery delays damage or delay that strategy," he commented.
In his view, turning around the situation will prove critical in the ongoing contest between the world's top two airframers. “It could be an irony or just bad news, but Boeing has the better widebody strategy," he said. "Then again, Boeing's execution has been much worse. If you win with the A350, you’re probably on safer ground, and more likely to get your replacement jets faster. Will [the B777X arrive in] 2025? Will it be 2026? Who the heck knows? And then the B787, of course, has had problems all of its own. Obviously, the line shut down. It sure looks like it’s a much smaller number of airlines cheering for the return of widebodies.”
Aboulafia believes Emirates’ fleet in two years’ time will not look radically different from its current form. “This is a maturing market that faces a lot of competition from upstart players, and whether it’s Turkish or Ethiopian [Airlines], everybody, most of all Air India, wants some of their traffic back,” he said. “Emirates did amazing work expanding over the past 15 to 20 years, going after other people’s traffic, and now they want it back.
"Then, of course, there’s the giant elephant in the corner: Crown Prince Mohammed bin Salman, the Saudi wealth fund, and whether they can turn Saudi Arabia into another giant Dubai. That’s a long-term thing. Nevertheless, if you’re in strategic planning at Emirates, you’ve got to be just a little bit terrified.”&nbsp;

<h2>Low-cost Carriers Seize New Opportunities</h2>
IBA’s Taylor said the region had seen the rise of low-cost carriers (LCCs) in recent years with the emergence of Flydubai, Air Arabia, and, more recently, WizzAir. “LCCs now make up 13 percent of the overall region’s capacity (ASKs) and with large numbers of aircraft on order; this will only increase,” he said. “LCCs in Europe and North America have been very successful in competing with legacy carriers on mature routes as well as creating new markets such as in the price-sensitive leisure segments."
According to IBA, in the Middle East, much of the traffic growth to date has centered on long-haul transfer, using its prime location to connect many global destinations. The UK-based consultancy now sees the LCC airlines creating and growing new domestic and intra-region routes aided by better inter-government traffic rights agreements.
As a result, regional LCCs have expanded their fleets rapidly with record aircraft orders. “Flydubai has 137 Boeing 737 types and Air Arabia 120 Airbus orders, for example," Taylor explained. "Airbus is leading the order count in the region with a total of 594 ahead of Boeing’s 560 aircraft. Airbus already has 795 aircraft in service in the region against 727 aircraft for Boeing and the new aircraft orders will only increase the lead.”&nbsp;
Cirium’s Morris said Flydubai has illustrated the potential for the co-existence of LCCs in the Gulf region, with its network complementing Emirates rather than cannibalizing it. “The significant order backlog for LCCs across the region—Jazeera, SalamAir, Flyadeal, FlyNas, Air Arabia, and others—indicates the potential in other parts of the region for the LCC model to stimulate and fulfill local demand in the medium- and longer term,” he commented.
In Cirium's view, the freighter market in the region has not mirrored Airbus’s dominance with passenger jets. “Airbus does have some progress with Etihad’s A350F commitment but that is relatively small scale when compared to Qatar’s 777-8F order,” Morris said. “It does seem likely that Boeing will retain freighter dominance in the Middle East for a while longer yet.”
<h2>Saudi Arabia to Challenge Gulf Rivals</h2>
The anticipated launch in 2025 of the new national carrier, Riyadh Air, and plans for fleet expansion by existing players such as Saudia, Flyadeal, and FlyNas would facilitate the arrival of a higher number of visitors and enable tourism growth, according to Al Jazira Capital's recent analysis of the Saudi Arabian travel and tourism sectors. Plans call for new carrier <a href="https://www.linkedin.com/in/klaus-goersch/">Neom Airlines</a>&nbsp;to serve the new residential developments in the Kingdom’s northwest region.
“A national aviation strategy, which was launched last year, aims to connect 250 direct destinations [compared with today's roughly 100] to and from the Kingdom’s airports, and triple air traffic to 330 million passengers, bringing the Kingdom to first place in the Middle East by 2030,” the Al Jazira Capital report concluded. “Under the aviation strategy, the government seeks to boost investments of more than $100 billion and transport 500 million passengers by the end of the current decade.”&nbsp;
Upon launch, Riyadh Air announced in March 2023 its agreement with Boeing for a sales agreement covering seventy-two 787-9 Dreamliners. Of those, 39 involve a firm order, with a further 33 on option.
“In addition, Riyadh Air is presently in discussions with both Airbus and Boeing for a large order of narrowbody aircraft,” Abdullah Aljawini, CEO of Dawli Aerospace in Riyadh, told AIN. “An agreed-on delivery schedule between airlines and aircraft manufacturers is legally binding, and variations from the new aircraft delivery dates can result in substantial discounts in favor of the airline.”
Riyadh Air CEO Tony Douglas anticipates that Riyadh Air’s first flight will depart in mid-2025 and connect the Saudi capital city to more than 100 destinations around the world by 2030. “We are running on schedule, having already completed several defining milestones,” he told AIN.&nbsp;
Initially, Riyadh Air will operate from the city's existing&nbsp;King Khalid International Airport before later moving into&nbsp;the new King Salman International Airport, which the kingdom anticipates opening in 2027.&nbsp;Given the big-spending moves made in the sporting domains of football, boxing, and golf, by Saudi entities, the airline might have to pay top dollar to attract pilots and other staff, although Douglas chose not to address that point directly.
“Riyadh Air will become a prominent driver of employment, creating 200,000 job opportunities directly and indirectly and we are recruiting the brightest minds and talent to be part of the airline,” he commented.&nbsp;“We’ve been very encouraged by the response and have already had over 900,000 applications from within the kingdom and around the world. Over the next few months, we will be running a series of recruitment roadshows with a view to recruiting our first intake of cabin crew by the end of 2024, with the first of those joining in the first quarter of 2025.”
However, Aboulafia said Riyadh Air could find the supply-demand curve a challenge even in such a deep-pocketed market as Saudi Arabia. “This is an enterprise that’s starting up right in the middle of the worst aviation industry inflation we’ve seen in decades,” he said. “First and foremost, it’s pilot wages, but it’s pretty much wages for any skilled workers in the aviation segment. It’s labor. Beyond that, I think it’s the first time we’ve seen any hope of aircraft price increases for decades—in real terms, not in fake ‘here’s the list price’ terms, but genuine terms. You’re actually talking about things firming up, which of course you have to do because otherwise the OEMs are just going to take a bath"&nbsp;

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