The detrimental effects on Middle East airlines of travel ban efforts by the administration of U.S. President Donald Trump and moves over the summer to restrict electronic devices larger than a cell phone on flights to and from certain countries in the region have begun to lift, and traffic has returned to roughly a 7-percent year-over-year rate of growth. Granted, the industry hasn’t yet resumed the double-digit expansion rates at which it finished 2016, and intensifying competition to fill still rapidly growing capacity among Emirates, Etihad and Qatar Airways has resulted in some pressure on yields and overall economic performance. Meanwhile, oil prices remain stubbornly low, on one hand easing the airlines’ cost burden but hurting the wider economies on which they depend for their existence. Nevertheless, the region’s airlines have proved as resilient as ever amid the continuing sectarian conflict and diplomatic crises under which lesser enterprises might have succumbed long ago.
“I think they’re going to continue to evolve their businesses...they’re going to look at opportunities to adjust costs...look at configuration of airplanes,” said Boeing vice president of sales for the Middle East, Russia and Central Asia Marty Bentrott during a pre-show interview with AIN. “These are pretty savvy airlines and I think they’re going to turn things around and push their yields up...There certainly are some things in the region that aren’t helping. The [diplomatic rift with Qatar] hasn’t helped. Some of the areas of conflict, that hasn’t necessarily helped. But I think they’ll be back.”
While growth rates might have moderated somewhat, the pressures on infrastructure have as well. The opening of Concourse D at Dubai International Airport in February last year had already opened more slots at the facility's other three concourses for Emirates Airline, when sister carrier FlyDubai this year moved much of its capacity to the new Al Maktoum International Airport at Dubai World Central. In fact, the pace of development at DWC and the high-speed train network to serve the new airport hasn’t quite lived up to earlier ambitions as a result of slumping oil prices; the urgency that marked the airport’s early progress appears to have moderated with economic growth, diminishing aspirations to move Emirates’ operations there before 2024 or 2025. Now, DWC has lost one of its early tenants in Qatar Airways following the UAE’s severance of all diplomatic ties with Qatar.
Elsewhere, the new airport in Doha has proved an immense help to Qatar’s efforts to fly more passengers in and out of that hub. In Amman, Jordan, improvements at Queen Alia International Airport—the second of three phases of which crews completed last year—have nearly doubled that airport’s capacity to 12 million a year. While delays continue to plague construction of new terminals at Muscat and Abu Dhabi, “the investment is there,” said Bentrott, who added that the Muscat facility would likely open “some time toward the end of next year” and Abu Dhabi either next year or in 2019.
777X Future
Bentrott said he thinks resilience the three big Gulf airlines have exhibited portends a bright future for the new Boeing 777X, for example, notwithstanding some analysts’ belief that the narrow geographic scope of the company’s customer base for the new widebody makes it vulnerable to an economic slowdown in the region.
Of course, the biggest prizes for Boeing have long resided in the Gulf region, whose status as a global hub have allowed Emirates, Etihad and Qatar Airways to assume a place among the world’s most influential carriers.
Emirates’ influence, for example, proved plainly evident in the ultimate form of the Boeing 777X. As the biggest customer for the new jet, scheduled for entry into service in 2020, Emirates played a key role in determining range, capacity and payload capability. By extension, Qatar and Etihad will benefit as well, given that they operate in virtually the same environment and generally maintain the same mission profiles.
In fact, all three airlines contributed to Boeing’s sales windfall during the 2013 Dubai Airshow, where the company launched the 777X on the strength of commitments for 150 of the new jets from Emirates, 50 from Qatar and 25 from Etihad.
“You know, there have been all of these rumblings about softening in the widebody marketplace; there’s been speculation in terms of deferrals of the new 777; I haven’t seen any of that,” said Bentrott. “Our customers continue to take the airplanes they’ve contracted for; the new 777 is running ahead of schedule; our customers have been very open about the fact that if the schedule is pulled forward they’ll adjust their delivery timing forward.”
Although Boeing’s schedules still call for entry into service in mid-2020, the company could move first delivery forward “by a few months” if the program continues on its current pace, said Bentrott. However, he also said that during the order frenzy of 2013, some customers might have reserved a few too many early delivery slots in certain years, possibly leaving openings for other buyers. “These are adjustments basically within a six-month to a year period of time rather than massive deferrals where you’re moving airplanes three to four years out,” he explained.
While Bentrott professes little doubt about the continuing vitality of the Gulf market, other parts of the Middle East have emerged as high-value targets in their own right. Iran and Egypt, for example, stand as potentially lucrative markets, but ones in which Boeing has had to exhibit patience. “Egyptair has been in the RFP process for eight months to a year, and they’re getting close to decision time,” said Bentrott. A month before the start of the show, the Egyptian flag carrier continued to evaluate 787-9s and 787-10s as part of its widebody studies and the 737 Max for its single-aisle requirement.
For Iran, Boeing has gotten approval from the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) to start deliveries to Iran Air, with which Boeing reached a definitive agreement to sell fifty 737 Max 8s, fifteen 777-300ERs and fifteen 777-9s in December last year. Of those airplanes, OFAC has approved delivery of the 777s, which Boeing expects to start sending to the flag carrier next year.
Still, questions surrounding the political environment and its potential effect on the deal remain as a U.S. Presidential administration openly hostile to Barack Obama’s signature nuclear settlement with Iran continues to characterize it as one-sided and ill-conceived.
“Everything is threatened by the political environment, because if there is a change to the position with regard to the agreement with Iran, if there’s a pullback on what licenses have been issued, then it puts things in question,” said Bentrott.
Despite the continuing political tensions, Bentrott expressed optimism for the region, at least in terms of Boeing’s business prospects there. “A lot of our customers have weathered the Arab Spring, they’ve weathered SARS, they’ve weathered this and that, and they’ve made it through,” said Bentrott. “It appears as though [tensions] in Syria may be winding down; maybe if the [tensions] in Yemen wind down and we get closure in terms of the issue with the Gulf states, there will actually be an uptick.”