Gulf carriers’ 15 minutes of jet order hysteria
Gulf airlines dropped $100 billion in 15 minutes on the opening day of the Dubai Airshow.
November 18, 2013 9:38 by Reuters
It was a security consultant’s nightmare and a moment to savour – royalty, airline bosses, planemakers and press hordes wedged into the same overcrowded room wanting to see the same thing: the colour of money in the oil-rich and fast-growing Gulf.
Gulf airlines dropped $100 billion in 15 minutes on the opening day of the Dubai Airshow, as they ordered hundreds of passenger jets to expand a common ambition to turn the region into a global aviation hub.
After one mega-deal, as Emirates airline and Qatar Airways ordered 200 of Boeing’s newly re-launched 777 jet, a quick decor change brought Airbus to the stage to sign a deal with Emirates for 50 of the world’s largest jetliner, the A380 superjumbo.
“I don’t have my calculator,” Sheikh Ahmed bin Saeed al Maktoum, chairman of Dubai airline groups Emiratesand flydubai joked when asked to estimate the value of deals just unveiled.
The rapid burst of dealmaking captured both the frenzy of business activity in the region and the ambition, shared by Gulf states, to diversify their economies away from energy wealth.
But the carefully choreographed event also masked bitter competition between the region’s airlines to attract passengers, amid weak margins and high fuel costs.
Airlines jostled for position ahead of the show, each wanting to go first, people aware of the arrangements said.
“The press conferences were changed several times as all of them wanted to be the first to announce,” said one source familiar with the closed-door discussions.
Missing from the main announcement, where Boeing launched its revamped 777 jet, was Abu Dhabi’s Etihad Airways, a rival of neighbouring Dubai’s Emirates which had agreed to announce orders at the show only after behind-the-scenes talks.
“We rarely announce plane orders at air shows but when we do, the world takes notice,” Etihad chief executive James Hogan declared after kicking off the show with his own 777 order.
ECONOMIC WEAPON OF CHOICE
The hub cities in the Gulf – Dubai, Abu Dhabi and Doha – are spending billions on infrastructure to draw more travellers from former hubs in Europe and Asia to the Middle East.
While Western carriers are languishing amid weak margins and high fuel costs, airlines are economic weapon of choice in the Gulf to globalise its economy and diversify oil-based revenue.
The deep-pocketed Gulf carriers are taking bigger roles in global aviation, with planemakers Airbus and Boeing depending increasingly on them for the success and sales of their planes.
“The Middle East three (Emirates, Etihad and Qatar Air) have successfully expanded their global route networks over the past decade, in part through the economics of securing highly competitive deals for long haul aircraft – particularly at a time when airlines in other areas of the world faced many challenges to their businesses,” saidPeter Morris, chief economist at the London-based consultancy Ascend.
Emirates, the oldest of the Gulf carriers, uses Dubai’s hub airport status to fill its large fleet of A380 superjumbos that reach all the way to Europe, the United States and Australia.
“I would say that the successful and profitable development of Emirates airline is perhaps the most significant factor of last 20 years that has put Dubai on the map for its economy, trade, tourism and growth,” Morris said.
Etihad, which completed its 10 years in service this month is catching up through equity partnerships in airlines around the world including Air Berlin, Virgin Australia , Aer Lingus and India’s Jet Airways.
Qatar Airways has chosen the more traditional route – it became part of the oneworld alliance of airlines in October after decades of resistance from its European rivals.
While competing with each other, the new breed of Gulf airline faces criticism from carriers in the United Statesand Europe which say such large plane orders could disrupt markets.
U.S. airline pilots have said the huge growth is unfair, while some have called for curbs on the use of U.S. export credits to smooth the plane orders to foreign carriers.
“We have to accept competition and never fear it,” Sheikh Ahmed said. “People have the right to expand, grow their business and prepare for newcomers to the market.”