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28 March 2024

Mideast carriers' capacity to grow at 11%: Boeing

Aircraft at Dubai International Airport. The Middle East will be the fourth largest market in the world after the US, China and Germany, says Boeing. (EB FILE)

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By Sachin Dave

In what comes as another positive indication for the regional aviation sector, Boeing is expecting a steady 11 per cent year-on-year growth in the capacity for Middle East carriers until 2015.

Low-cost carriers will witness the biggest boost, with nearly a 400 per cent increase, according to a report by Boeing.

Randy Tinseth, Vice-President Marketing, Boeing Commercial Airplanes, said: "The Middle East has huge potential and the region continued to grow even when the other regional markets were passing through a rough patch."

Rise of budget airlines

Tinseth said while presently the budget airlines are still growing, there will be a mature market segmentation for these carriers in the region within a few years.

"We expect a demand of about 1,700 aircraft over 20 years, of which 1,000 will be wide-bodied," said Tinseth. The low-cost carriers have a bright future, he added.

Speaking to Emirates Business, a senior official with nasair, the low-cost airline of Saudi Arabia, said: "We have aggressive plans for expansion and at the moment we are focusing on the Indian subcontinent."

Nasair recently launched its service from Mumbai to Riyadh and Jeddah, running four flights a week. The company is targeting the 1.8 million Indian expats living in Saudi Arabia.

"We are bullish on India and are planning to start new flights to Kochi, Kozhikode and New Delhi," he said.

The company is also looking to expand to Trivandrum, Hyderabad, Chennai and Lucknow by 2011. Other regional budget airlines in the region are not far behind, starting with flydubai.

After nearly a year of speculations and operational issues, the Dubai-based low-cost carrier finally announced flights to India last week, with the Lucknow route launching from June 2.

Ghaith Al Ghaith, Chief Executive Officer of flydubai, confirmed to this newspaper that the airline is looking to further strengthen its links in India.

Lucknow's addition to flydubai's network sees the carrier gain a stronger foothold in the Indian subcontinent after it announced flights to Karachi in Pakistan earlier this month. "The Indian subcontinent is a very important market and we are excited about bringing our low-cost service to this region," said Al Ghaith.

The media has been reporting the airline's plans to expand to Indian cities such as Goa, Jaipur and Pune.

When quizzed again about the potential of such destinations being added to the route network of flydubai, Al Ghaith said: "We hope that we will gradually be able to increase the number of network cities in India and that we will fly to as many places as we have done with both Egypt and Syria. We are working closely with Indian authorities to further develop links between Dubai and India."

Al Ghaith has confirmed the airline will receive its eighth aircraft this month and will have 13 by the end of this year. He added: "We will have 50 by 2016, and have no need of further aircraft orders at this point."

Market share

However, Boeing estimates that the region's low-cost carriers are struggling for a market share in total airline seats, which is still ruled by full-service airlines.

Sharjah-based Air Arabia, Kuwait's Jazeera Airways, Saudi Arabia's nasair and Sama, Bahrain Air and flydubai together hold only nine per cent of the total airline seats in the region, said the Boeing report.

According to Case Airclaims, these low-cost carriers have 59 jet aircraft in service and nearly 148 planes on order.

Compared to this, Emirates has a whopping $48 billion (Dh176bn) of orders for 146 new aircraft with a few more being added to the tally within eight weeks, according to Sheikh Ahmed bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority and Chairman and CEO of Emirates group and airline.

This indicates the Dubai-based carrier's strength and growing market share. The Boeing report indicates that Emirates leads the race with a 22 per cent share in airline seats. This is followed by Saudi Arabian Airlines with 19 per cent.

It is interesting to note that in 2000 Saudi Arabian Airlines led the race with a 30 per cent share of the total market. Meanwhile, Egypt Air comes third with a market share of 14 per cent and Qatar Airways is fourth with 10 per cent.

Increase in traffic

Naturally, working in parallel with this aggressive growth is an increase in total air traffic to and from the Middle East.

The Boeing report said traffic to this region from Europe is set to grow by about 5.5 per cent year-on-year until 2029. While traffic from South-west Asia to the Middle East could also grow by nearly six per cent over the same period.

The United States-based plane maker is also expecting a huge surge in its market share in the Middle East with the sale of commercial airplanes worth $150 billion over a period of 20 years. The company currently boasts a market share of about 40 per cent in the region, which it aims to increase to 50 per cent within two decades.

"From about 800 planes at present, the Middle East will require 1,800 planes 20 years from now, with airlines in the region requiring over 1,700 aircraft valued at $300bn. Our goal is to achieve 50 per cent market share and we have a lot of opportunities after we have had success with regional aviation firms," said Tinseth.

Boeing sits on a market share of 40 per cent at present, which was only about 30 per cent up until five years ago. The plane maker sees a tough competitor in Airbus, which holds a strong position in the region and accounts for 120 of Emirates' 146 aircraft order. Boeing has been expecting to beat Airbus with its new models, including the much-awaited Dreamliner, which would be rolled out by 2011.

The Middle East economy grew at 0.3 per cent in 2009 and is expected to outpace the world in 2010. The economic recovery this year will be followed by stronger gains in 2011 and 2012, added Tinseth.

"Middle East air traffic defied trends with double-digit growth while all other regions contracted and many new more efficient aircraft on order offer competitive advantages," he added.

The Boeing report stated the Middle East will be the fourth largest market in the world after the US, China and Germany.

Figures for new deliveries of airplanes by region also show that the Middle East accounts for four per cent of the total global aviation sales and two per cent of total new airplane deliveries.

Boeing is also planning to expand in the region and is currently holding talks with Mubadala Development Company, the Abu Dhabi-based state-owned investment firm. "Last year, we signed a framework agreement to do business with them [Mubadala] in future and we continue to work with them to define what that work state would be," Tinseth said.

The growth in the region is also set to benefit Boeing's transpacific global competitor, Airbus. Airbus is expecting a huge surge in its top line due to the growth and penetration in the Middle East. According to company officials, Airbus expects to sell about 300 jets this year. Although, like Boeing, Airbus too has a backlog at a global level including the Middle East. Airbus is also banking on Emirates for this growth. Emirates, the biggest customer for A350 model of Airbus, is set to receive its first A350s by March 2014. (With inputs from Bindu Suresh Rai)