Monday, February 14, 2011

An interesting... rise of Middle Eastern airlines

I think it is quite clear at this point in time that Emirates, if it were to come down to a proportional popular vote, would probably be the world’s favourite airline. It is already the planet’s biggest airline by miles flown, and one of few to churn out a profit – in aviation this is virtually impossible. Aside from costs for the airline being lower due to differences in menial wages in the Middle East compared to Europe, there are a few notables pushing carriers from this region up above everyone else.

Asian airlines have already stolen the golden age of travel away from older and more established airlines in Europe and the USA. The only 5-star airlines (according to Skytrax ratings) in the world are all Asian: Cathay Pacific (Hong Kong), Asiana (South Korea), Hainan Airlines (China), Kingfisher Airlines (India), Qatar Airways, Singapore and Malaysian. So luxurywise, the States and Europe lost it a while ago.

Where the Middle East continues to take over has got a lot to do with its geography – it is halfway to everywhere. The New York times describes Dubai as within an 8-hour flight of 4 billion people – which the three giant Middle Eastern airlines (Emirates, Etihad, Qatar Airways) have taken advantage of. But I think the real recipe for success of Emirates and Qatar Airways in particular has been the destinations they choose to fly to, and pricing strategies.

Getting the pricing correct entails asking one’s self at what point people feel they have saved enough money that they are prepared to stop rather than fly direct. I once saved about R6000 flying Qatar Airways instead of SAA between Johannesburg and London. These airlines knows where that line is, and are now actually one of the most popular links between South Africa and the world, as well as Europe.

Emirates and Qatar Airways have also chosen their destinations superbly. For example, Sweden’s airline, SAS, doesn’t really connect the world and instead relies on an alliance with (totally overpriced, in my opinion) British Airways to get its people around. Well, Qatar Airways can get them to Doha and then connect them to just about any big business or tourist city in the world for less than they would pay to go via London, Paris, Frankfurt or Amsterdam. Emirates has an even bigger advantage as Dubai (it’s hub) is one of the world’s most sought after destinations - most flights ticketed through Emirates have the option for a free stopover in Dubai too.

South Africa is lucky in that Emirates also operates direct flights from Dubai to Johanesburg, Cape Town AND Durban – the only direct passenger flight from our east coast to a major international destination (even SAA doesn’t provide this – Durbanites need to fly the national carrier via Johannsburg). But Durban isn’t the only lucky one in Africa – Khartoum, Entebbe, Mahe, Accra, Abidjan etc are also all cities that one would not expect a major international airline to give much fervor to, but Emirates does – as well as the major cities – Johannesburg, Lagos, Luanda, Cario, Addis Ababa etc. Christchurch, Guangzhou, Ahmedabad, Kozhikode are probably as grateful. Emirates has seen the potential and performance of these destinations and made them work – at a lower cost to consumers.

From a customer point of view, there are also no hidden or added-on fees. Once you have paid for your ticket on Emirates, the only time you may have to pull out your credit card is to pay for overweight baggage (it’s a luxury we share with SAA by the way). Contrast this with a friend who flew United Airlines to Hong Kong three weeks ago and had to cough up for booze and to watch in-flight movies. British Airways charges £50 for a second bag (not overweight, just another one). Airlines are all ramping up these sorts of ludicrous charges nowadays. The golden age of travel is pretty dead for most Western airlines.
But not the Middle Eastern ones.

And Emirates reigns as king - in popularity and profit margins. Qatar Airways, a newer airline, as prince - a definite second best. And Etihad, Abu Dhabi's carrier, lies in wait with the potential to dethrone both of them.

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