Bloomberg News

Qatar Air Says ‘Belt Up’ as Middle East Carriers Pull in Orders

November 17, 2011

Nov. 15 (Bloomberg) -- Qatar Airways Ltd. Chief Executive Officer Akbar Al Baker is giving the competition a word of caution from the airline’s flight deck: “belt up.”

The carrier and larger competitor Emirates ruled the Dubai Air show this week, signing firm orders valued at more than $24 billion. Their fleets have ballooned in recent years as the carriers funnel global travelers through the Middle East. Emirates closed the single largest deal in Boeing Co.’s history, announcing 50 firm orders for the 777-300ER aircraft.

“Some of this may be speculative, but they seem determined to convert oil wells into aviation market share,” said Richard Aboulafia, vice president of analysis at Teal Group.

The airlines have helped transform the Middle East into an omni-directional center from where travelers can connect most points on the globe with a single stop. Emirates is the biggest buyer of Airbus SAS A380 super jumbos and the Boeing 777, as it works to accommodate passenger numbers that have surged fivefold in a decade.

Emirates ordered aircraft that accommodate 18,000 people in total and Qatar ordered planes that seat 10,000. Combined, that’s more than half the number of people who travel through Frankfurt airport each year.

Founded in 1985, Emirates developed an inter-continental network from 1996, when long-range Boeing 777s and Airbus A340s allowed it to reach new cities and meet the global aspirations of Dubai’s rulers. Qatar Airways was created in 1994, and is half owned by the government of Qatar.

Long-Haul Hub

“They have the ambition, they have the product and they produce effective prices,” said Chris Tarry, an independent airline analyst in London who has covered the industry for almost 30 years. “As their networks become more extensive and frequencies become denser than the dwell times diminish, so the model becomes more competitive.”

Al Baker said the second-biggest Middle-Eastern carrier may operate 190 planes by 2020, 60 more than envisaged, as it follows Emirates in building a long-haul transfer hub to rival incumbents in Western Europe. Abu Dhabi’s Etihad Airways, the regional No. 3, is also committed to adding new jets and routes, CEO James Hogan has said.

Airlines critical of Gulf carriers “should review their own plan,” Emirates Chairman and CEO Sheikh Ahmed bin Saeed Al Maktoum said at the Dubai Air show.

‘Face the Music’

“I only say to our adversaries: belt up,” Al Baker said in Dubai on Nov. 14. “For so long, our airlines have faced jibes from those that cannot face reality. It is time they face the music and understand that we in the Middle East are here to stay.”

Airlines outside the Middle East aren’t the only ones feeling the heat. Al Baker used the Dubai Air show to rip into Airbus, publicly dressing down the European manufacturer after negotiations on an order stalled yesterday. Hours after Al Baker stood up Airbus at a signing ceremony, the two sides reconciled, and Qatar Air disclosed a $6.4 billion deal to buy A320neo single-aisle jets and more A380 double-decker aircraft.

Dubai, the Middle East’s tourism and trade hub, is building on its position as a global aviation and business center with tens of billions of dollars invested in infrastructure. The Gulf emirate, one of seven in the United Arab Emirates, is working on a second airport that will be the world’s largest upon completion in the middle of next decade.

The Al Maktoum International airport is designed to eventually handle 160 million travelers a year. That compares with current capacity of no more than 70 million at London Heathrow, Europe’s busiest airport. Dubai is home to the world’s tallest tower, the Burj Khalifa skyscraper that rises in silvery setbacks to 2,717 feet (828 meters).

One A380 a Month

Qatar markets itself both as a five-star luxury airline, where first-class passengers enjoy perks including Prada SpA luxury products, and the airline of choice on less established routes into eastern Europe and Iran. The carrier will further expand its network into Iran this year, Al Baker said yesterday.

Emirates, too, is beefing up its global operations. The carrier, the biggest airline by international traffic, serves 114 destinations in 67 countries, and the company said yesterday that it is adding a third A380 service to Heathrow, flying to the London capital five times each day.

“The Middle East will remain a strong growth area for the next 20 odd years,” Airbus CEO Tom Enders said at the Dubai show. “Look at Emirates, which is basically receiving an A380 every month for the next four years or so.”

Shower Spas

Emirates operates 105 weekly flights to the U.K., serving Heathrow, London Gatwick, as well as Birmingham, Manchester, Newcastle and Glasgow. The A380, which has on-board lounges and shower spas, will start flying to Munich this month, the first entry into the Bavarian airport by the biggest passenger jet.

Carriers in the region account for less than 8 percent of global traffic, according to the International Air Transport Association trade group. At the same time, their outstanding orders are valued at $82.7 billion, or a quarter of all Airbus and Boeing twin-aisle planes, according to Teal Group in Fairfax, Virginia. Including single-aisle planes and the A380 and 747 jumbo jets, Gulf carriers comprise a fifth of the world’s backlog, Teal Group estimates.

“We’re now getting to a stage whether you could argue that some of these carriers have over-ordered planes,” said Rupinder Vig, an analyst at Morgan Stanley in London. “The Middle East infrastructure is far ahead, just look what’s happening with the new airport in Dubai, so I think if it goes through, then it can match the backlog.”

--With assistance from Steve Rothwell in London. Editors: Benedikt Kammel, Heather Harris

To contact the reporters on this story: Tamara Walid in Abu Dhabi at twalid@bloomberg.net; Andrea Rothman in Paris at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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