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espite the threat of long-term oil-prices, civil regional unrest and global economic uncer-tainty, the impact on air-travel to and through the Middle East has been relatively unaf-fected. The 2008 economic crisis certainly caused some turbulence in the sector, but Mid-dle East carriers managed to maintain yields in the face of those challenging events and will continue to be profitable in the foreseeable future.

Boeing, Vice-President of Marketing, Randy J. Tinseth reveals: “The Middle East has been one of the fastest growing and dynamic air-travel markets in the World. In fact, the In-ternational Air Transportation Authority (IATA) projects regional carriers to show a profit for 2011 with recent data showing 10% growth year-on-year. As we look to the future, Boe-ing sees demand for a total of 2,520 new airplanes in the region over the next 20 years.”

Capacity at the “Gulf 3” carriers – Qatar Airways (QA), Etihad and Emirates – has grown collectively by 23% over the past decade and there is fierce competition between them as they try to gain a competitive edge. d

Boeing hAs A huge BAcklog of orders for Their AircrAfTs And They recognise ThAT soMe of The Middle eAsT cArriers Are Their priMAry cusToMers. Why Are The “gulf 3” looking To purchAse More AircrAfTs As fuel-prices Are epecTed To escAlATe?

‘sixTh freedoM’

Gulf Airlines embrace their

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o c t o b e r 2 0 1 1 QATAR TODAy 65

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Market StrategyWhy are the ‘Gulf 3’ performing so well? What is their strategy when it comes to enticing potential customers to fly with them?

“Many of the airlines in the region are leveraging both their ‘Sixth Freedom’ right and their geographical location in order to grow,” explains Tinseth. “The ‘Sixth Free-dom’ carriers are part of the ‘Freedoms of the air’, which are a set of commercial aviation rights granting a country’s airlines the privilege to enter and land in another country’s airspace. The Sixth Freedom covers the right of an airline to carry pas-sengers or cargo from a second country to a third country via a scheduled stop in the airline’s home country. An exam-ple of this can be QA carrying a passenger from a city in Europe to a city in Australia via Doha. While the passenger’s destination is not Doha, the journey involves a stopover in Qatar before catching a connecting flight onward to Australia.”

I experienced the force of this strategy first-hand recently when I got a flight from Lagos in Nigeria to Doha and all bar two got off the feeder bus for a transfer to another location. Myself and a young Nigerian girl followed on to Arrivals. The passengers ei-ther side of me on the plane were en route to India and the Philippines from Ghana and Benin, respectively. The huge air travel mar-ket does not depend on the relatively small populations of the home countries of course, because the passengers are merely using the Gulf airports as conduit. The three carriers are using their Sixth Freedom right to ex-pand into new markets, and now offer more than 100 weekly frequencies to destinations in the Americas, including Houston, Chi-cago, Los Angeles, New York, San Francisco, Washington D.C., Toronto and Sao Paulo. More than 70 weekly flights are offered in the rapidly burgeoning Chinese market. QA added Sofia in Bulgaria as its latest des-tination last month, which follows on from routes to Bucharest, Budapest, Stuttgart and Venice which were initiated in 2011.

This is the model upon which the three air carriers are placing their hopes and capital for the next couple of decades. These mod-els and the dynamic growth of air-travel in emerging economies – which are spread out over the continents – are diversifying the demand for aircrafts. As global air travel declined in 2009 – in the wake of the 2008 economic slump – this business model still returned growth showing how capable it is.

DemandA Boeing forecast predicted that the greatest demand for new aircrafts will come from the United States, then China, but astonishingly the United Arab Emirates – with a popula-tion of approximately 9 million – is third on the list, due chiefly the fact that they are home to some competitive airlines, such as Etihad and Emirates Airlines, who are really

exercising their sixth freedom right.Such has been their drive to be the best,

they are now focusing on procuring new aircrafts for strategic reasons, which is why

Boeing are seeing such a huge backlog from the region as a whole.

“Newer airplanes are certainly more fuel efficient,” said Tinseth. “In fact, airlines in the Middle East, such as QA, have long rec-ognised the competitive advantage new air-planes provide and this is reflected in the large order backlog from the region.”

“An excellent example is the Boeing 787 Dreamliner,

which will provide QA with unmatched fuel ef-ficiency, resulting in exceptional environ-mental performance.

The airplane will use 20% less fuel for compa-

rable missions than today’s similarly sized airplane,” he added. With the price of fuel expected to rise year-on-year for the foreseeable future, Boeing still envisage that there will be almost three times as many aircrafts in operation out of the Middle East in 2030 as there is currently (1,040 vs 2710).

“We expect slow and constant growth of fuel prices over time. However, our forecast for airplane demand is based on our forecast for traffic growth over the next 20 years. As we look at the Middle East, we expect traffic to grow 6.6%and as a result airline fleets will grow to meet that demand.”

Single-aisle airplanes account for the ma-jority of deliveries over the next 20 years, which is approximately 70% of the load and about half of the overall value. Rapidly ex-panding air service within China and other emerging economies and the spread of low-cost carrier (LLC) business models through-out the world will further drive this market. The twin-aisle market, which includes effi-cient long-range airplanes such as the Boe-ing 787 and 777, is the fastest growing seg-ment in the market, accounting for 22% of the units and 43% of the cost.

Worldwide economic activity is the most active driver of growth in commercial air transport and the resulting demand for air-planes. Growth in air travel has historically outpaced economic growth, represented by GDP, by approximately 1.75%. So in ef-fect, about 60-80% of air-traffic growth can be attributed to economic growth. Boeing projects the global gross domestic product (GDP) to grow at an average of 3.3% per year for the next twenty years, whilst on the back of this forecast, worldwide passenger traffic and cargo traffic to grow by 5.1% and 5.6% respectively

“MANy Of ThE AIRLINES IN ThE REGION ARE LEvERAGING BOTh

ThEIR ‘SIxTh fREEDOM’ RIGhT AND ThEIR GEOGRAPhICAL LOCATION IN

ORDER TO GROw”

rAndy J. tinsEtH

vice-president of marketing, boeing

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