Aviation Industry in the Middle East 
Snapshot is a monthly report that represents a Snapshot of the trending issues, addressing the most common questions, paving the way to drawing an insightful outlook on the near future shedding the light in specific on the MENA region.
The aviation industry in the Middle East has been growing tremendously during the last decade and is contributing- to a large extent- in supporting employment and GDP in the region. In 2014, the air transport sector has supported 1.2 million jobs and contributed by 97.5 USD BN to GDP in the Middle East. The airline industry in the region is predicted to lead global airline industry in 2017 as it enjoys the highest growth in terms of new airline capacity and revenue passenger kilometers (RPK, a key industry metric). It is expected that the RPK of the Middle East will continue to grow at 9% in the coming few years compared to RPK growth of 4.5% in Africa, 4% in Europe and 2.5% in North America. Despite the Gulf crisis that has taken place in June 2017 and its instant negative impact on some of the airlines and despite the claims raised by American airlines of unfair competition against Gulf airlines, it is still estimated that the airline industry would continue to grow at an increasing rate. 
Question 1 What are the strongest airlines in the Middle East?
The region industry is dominated by the big three airlines; Emirates Airways, Etihad Airways and Qatar Airlines. Their great contribution to the market in terms of passengers and revenues, the industry as a whole in the Middle East has benefited from a 10.5% increase in the Revenue Passenger Kilometer (RPK) in 2016 c ompared to the year before.

  • Revenue Passenger Kilometer (RPK): is an airline industry metric that shows the number of kilometers traveled by paying passengers. It is calculated as the number of revenue passengers multiplied by the total distance traveled. Since it measures the actual demand for air transport, it is often referred to as airline "traffic".
During 2015,  Etihad  Airways has announced it carried 17 million passengers, which is a 17% increase compared to 2014.

Emirates Airlines  has dominated the number of passengers and revenues among the three airlines throughout 2011 till 2017. 

Even though Emirates is the leader airline,  Qatar Airways, in H1-2017, was announced to be the world best airline at the SKYTRAX 2017 World Airline Awards. It has won the "prestigious airline" title for the fourth time. It also enjoyed further success by winning awards for the world's best business class, the world's best first class lounge and as the best airline in the Middle East.

Question 2: What drives the growth of the airline industry in the Middle East?

  1. First Driver: Shift in airline landscape
  • One key driver of the growth in aviation industry is the shift in airline landscape. The rapid growth of air travel in developing markets - such as Latin America and Asia - is shifting the industry's center of gravity. Middle East-based carriers such as Emirates, Etihad Airways, and Qatar Airways have started to contribute a large portion of the formerly profitable Europe-Asia traffic.
  • The Middle East carriers are characterized by  their unique geographic positioning - most of the world's population is within eight hours' flying time - meaning that they are able to capture a huge share of long-haul market growth. 
       2Second Driver: Increased demand for air travel

  • Another key driver of the growth in the aviation industry is an increased global demand for air travel. The International Air Transport Association (IATA) announced that the global demand for air travel has increased by 6.3% in 2016 which is ahead of the average ten year annual growth of 5.5%.
  • The Middle East had the strongest regional annual traffic growth for the fifth year in a row. RPKs increased by 11.8%, consolidating the region's position as the third-largest market for international passengers. Capacity growth of 13.7% continued to outstrip demand, with the result that the load factor fell by 1.3% to reach 74.7%
3 Third Driver: Expansion of Gulf airlines
  • A third major driver is the expansion of Gulf airlines towards the U.S and Europe.
  • Middle Eastern airlines are slowly buying up pieces of European airlines, as a way of restricting these airlines from expanding. Qatar Airways acquired  9.99% of British Airways. British Airways bought Aer Lingus, and Etihad Airways owns 5% of Aer Lingus. Therefore, Gulf airlines are proving existence in all markets.
  • Also, one major goal for expansion for Middle Eastern airlines is having more non-stop flights to the US without transits in Europe. 
Question 3: What are the "open skies agreement" disputes?



  • U.S airlines (Delta, American and United) are accusing Gulf airlines of  unfair competition by vio lating the  "open skies aviation agreement " which states that there should be no governmental support   for airlines. U.S airlines claim that Gulf airlines are being  "unfairly supported" by government subsidies (receiving around 42 BN USD) and  highly competing on the same routes U.S airlines is serving.
  • The big target for the Gulf airlines is not to operate for profit, but to put their countries strategically on the global map and to build up their economies beyond oil. 
  • As a result, the U.S complaint is all about being "unfair" to compete with governmentally supported airlines that are not operating for profit with their airlines that fundamentally aims for profit. 
  • American airlines complained that their bookings for destinations such as San  Francisco, Orlando and Chicago to the region have decreased by 13% since Gulf airlines started serving those routes.
  • The Gulf carriers' share of the American airline market to the region has increased as they have  increased their offerin gs . For example, traffic from Orlando has surged since Emirates began flying that route.
  • Also, overall flight bookings to the Middle East, West Asia and South East Asia during 2015 increased 74% compared with the same period in 2014 before Emirates' entry into the market, from an average of 232 to 409 bookings per day.
  • Consequently, U.S airlines range has increased further with continued disputes with Gulf airlines. 
Question 4: Will the Gulf crisis affect airline industry?
  • In June 2017, the governments of the United Arab Emirates, Bahrain, Saudi Arabia and Egypt announced severing diplomatic ties with Qatar accusing it of supporting terrorism. The G4 cut all land, sea and air links with Qatar.
  • Consequently, the main stakeholder involved is Qatar Airways which was banned from flying to and above the four countries and was forced to ground about 18 destinations and 50 flights per day. The rerouting resulted in higher fuel costs and longer flight times.
  • In order to cover the lost destinations, Qatar Airways CEO, Akbar Al Baker announced that the airline would schedule more flights to other destinations and would add 24 new destinations in the coming 12 months. Qatar is exploiting its strategic location of targeting east and west to overcome lost destinations in the region.
  • In effect, Qatar Airways faced only short term losses directly after the crisis, however, its award  by SKYTRAX as the best airline in the world has enabled it to recover from the crisis quickly and boosted the expectations about long term profits despite the crisis.
  • For other airlines in the region, mainly Emirates and Etihad, there might be a temporary loss due to cancelled flights; however, in the long term, other airlines will still be able to sustain their position in the market.
  • Therefore, the crisis would not have a huge influence on the growth of the industry as the main two drivers, mentioned earlier for its growth, are consistent. 

Question 5: What are the forecasts about the industry's growth?

  • It can be noted that Gulf airlines are dominating the growth in the overall industry. Gulf states are focusing on diversifying and modernizing their economies which involves aviation improvements and expansion. Governments in the Middle East recognize the value of connectivity by aviation to enhance global trade and development. All region airplanes are emphasizing on plans to expand their services around the globe to maintain market share.
  • As the biggest three airlines in the region continue expanding and improving their services, it is most likely that the competition among them will intensify which might tempt other U.S or European airlines to take advantage of their rivalry.
Industry by 2035
  • The Middle East aviation market is expected to grow  by 5% and witness additional 258 million passengers per year on routes to, from and within the region by 2035 according to figures released by IATA wher e the biggest driver of the growth will be passengers from the Asia-P acific region.
  • It is expected that UAE, Qatar and Saudi Arabia will experience a strong growth reaching a total market size of 414 million passengers . This  can be driven by the increased demand for air travel as people want to fly, explore, trade and benefit in which the number of travelers would reach 7.8 billion by the assumed date.
The airline industry in the Middle East, especially the Gulf area has been booming significantly during the past 10 years. The industry has been growing fast due to several forces ; on top of which is the strategic positioning of the Gulf area, an increased global demand for air travel and an increased appetite for the top Gulf airlines to expand their services in the U.S and Europe. Despite the disputes prevailing between Arabian Gulf airlines and U.S airlines over claimed violations of the "open skies agreement" and despite the recent diplomatic Gulf crisis, analysts still believe that the aviation industry in the Middle East would still show healthy growth and increased number of passengers by 2035. The IATA forecasts that the largest contributing area of providing passengers to the Middle Eastern carriers would be the Asia-Pacific area. All in all, the Middle Eastern airlines, especially the Gulf ones, have proven strong market position and are still expected to prove a stronger one.
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