Gulf to change how people travel

So what will the world look like in 2015? Sarah Palin could be coming to the end of her first term as US President, China could be experiencing its first recession, at least three European countries might still be under the control of the International Monetary Fund and there could even be a unified Korea. A world of possibilities exist and it would be a brave seer who stuck his neck out to make firm predictions.

When it comes to the aviation market, however, the future is a little easier to predict as many of the trends are already in place. In short-haul travel, for example, it is reasonable to expect that the low-cost model will continue to reign supreme and flag carriers will gradually retreat from domestic and regional services.

In the established markets of Europe and the United States, the legacy carriers will restrict their short-haul operations to merely feeding passengers into their long-haul operations. All other ground will be ceded to budget airlines.

In emerging markets like the Middle East, Africa and Asia there will be dozens of new budget airlines launched over the next five years. Most will fail but some will succeed and I expect several billionaire entrepreneurs like Sir Richard Branson and Tony Fernandes (the boss of Air Asia) to emerge as a result of this boom.

There is certainly room for a couple more low-cost carriers in the Gulf and I look forward to seeing who emerges as the region's Branson.

In the long-haul market, the Gulf will continue to mould global travel patterns. The massive capacity growth of Emirates, Etihad and Qatar will mean that more and more passengers arrive at their destinations via Dubai, Abu Dhabi or Doha.

As if to emphasise this point, Emirates announced last week that it was ordering an additional 32 of Airbus's massive A380s. When the press release arrived by e-mail I initially read it wrongly and assumed the order was for A320s – Airbus's workhorse single-aisle aircraft. I literally had to do a double take before realising that the $11.5 billion (Dh42.2bn) deal, the largest ever for commercial aircraft, was for A380s.

The order will take the Emirates A380 fleet to 90, more than four times larger than its nearest competitor, Qantas. In a truly alarming revelation, Tim Clark, Managing Director of Emirates, told me that he would have bought even more but was constrained by the space available at the Dubai airport.

The impact of these aircraft over the next five to 10 years will be immense as Emirates undercuts rivals, encouraging passengers to travel through Dubai and take advantage of prices cheaper than those offered by legacy carriers. This surge in capacity will create a two-tier market for flights from Europe to Asia, Africa and India. Those willing to pay a premium will be able to fly direct from London or Paris to cities like Hong Kong, while everyone else will go via Dubai and pay 25 per cent to 50 per cent less.

Meanwhile, hubs like Hong Kong, Singapore and Bangkok will lose out as passengers from North America and Europe fly to Australia and Asia via Dubai. This is already happening but can only accelerate as more A380s join the Emirates fleet.

Europe's legacy carriers – airlines like British Airways and Air France – are likely to retreat to their core profitable routes (primarily transatlantic services from Europe to the US) in the face of this capacity onslaught from the Gulf carriers. A few airlines might try to compete head-on with Emirates but the only realistic way of doing so is by turning the oneworld, Star and Skyteam alliances into fully merged operations, creating truly global carriers. I am sceptical that Europe and America's over-protected airlines will want to go down this route, although BA might have the guts to give it a try.

The relentless growth of Emirates (and to a lesser extent Etihad and Qatar) will change the way that people travel in the years to come. The airline's A380s will be delivering tens of thousands of passengers a day through Dubai, making it the centre of world aviation.

But as volcanic ash clouds and swine flu remind us, the airline industry has a habit of lurching from one crisis to the next. The executives who run the Gulf's carriers can take nothing for granted and should treat all predictions of what the world will look like by 2015 with healthy skepticism.

- The author is business correspondent of The Times  of London. The views expressed are his own

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