Rise of the Gulf airlines

Amid charges of unfair competition, Emirates, Qatar Airways and Etihad Airways are upping the aviation game with fancy new aircraft and routes

Bank executive Philomena Gan catches the latest Chinese movies on her frequent Qatar Airways flights.

The route map on her personal video screen is a starburst of exotic places that she knows many airlines skip, from colonial Entebbe on the shores of Lake Victoria in Uganda to ancient Najaf with tiered buildings in Iraq.

Ms Gan, 55, a Singaporean who is based in Doha and has worked 11 years in a Qatari bank, has noticed more Singaporeans transiting in Doha, especially to Europe, over the years.

She flies a dozen times on Middle Eastern airlines each year for business and pleasure.

Over a decade, she has witnessed a "huge transformation" in the Gulf trio of Emirates, Qatar Airways and Etihad Airways.

They benefit from a combination of aviation-friendly investment and regulatory decisions by their local governments, aviation liberalisation efforts, their own aggressive fleet expansion..., the rapid growth of Europe- Asia travel and a low-cost base.

MR SIMON ELSEGOOD, senior aviation analyst (Middle East and Africa) at the Centre for Aviation in Sydney, on Gulf carriers

The changes are visible in every realm - the airlines order game-changing aircraft, rapidly introduce new routes, scoop up airline awards, excel in service and please movie-mad Asian travellers.

The rise of the Gulf carriers is creating new superlatives in air travel and intensifying the competition with other airlines.

But it also means fliers can enjoy lower airfares, wider choices and fancier services.

SUPERLATIVES

Among the Gulf airlines, ultra-long flights have emerged as one conspicuous vehicle of aviation ambition.

On March 2, Emirates made the world's longest commercial non- stop flight by distance between Dubai and Auckland. A double- decker Airbus 380, the world's largest passenger plane, flew 14,200km in 16 hours 24 minutes. Daily flights, however, will be on Boeing 777-200LR jets. Travel time on the route will shrink by three hours.

Not to be outdone, Qatar Airways in January revealed plans for a Doha-Auckland air odyssey of 18 hours 34 minutes that will span 14,539km.

Notably, Singapore Airlines still holds the world record for the longest commercial non-stop flight with its all-business-class service from Singapore to Newark in the United States.

This covered a distance of 15,344km and flight time was 18 to 19 hours - but the service was axed in 2013 after a nine-year run, due to soaring fuel costs and poor demand.

While it is true that the Middle East carriers have emerged in recent years, they are not the only competitors and Singapore Airlines has not sat still in the face of the challenges.

A SINGAPORE AIRLINES SPOKESMAN, on the carrier's growing network

NON-STOP GAME

But the national carrier, which has been hitting the headlines with this month's delivery of its newest long-haul jetliner, the Airbus 350, is back in the non-stop game.

It has ordered 67 sleek, fuel-efficient A350s, an investment of US$20.6 billion (S$28.4 billion) that will renew its fleet and, vitally, fuel its fight for a bigger share of the premium long-haul market.

In Toulouse, France, where Airbus handed over the jet to Singapore Airlines chief executive Goh Choon Phong, on March 2, he declared: "The A350 will be a game-changer for us, allowing for flights to more long-haul destinations on a non-stop basis, which will boost our network competitiveness and further develop the important Singapore hub."

Significantly, seven of these jets are ultra-long-range versions of the new A350 that will allow Singapore Airlines to restart its non-stop flights to the United States in 2018.

Qatar Airways had a one-year head start - it was the global launch customer of the A350 XWB (Xtra Wide Body) in January last year.

The plane was first flown on its Doha-Frankfurt route and, later, three times daily on the Doha-Singapore passage.

Other destinations include Munich, Adelaide, Dubai, New York, Philadelphia and Boston.

Its A350 XWB, with spacious cabins enhanced by panoramic windows and domed ceilings with LED mood lighting that helps beat jet-lag, has been a hit with passengers who post selfies taken in the plush business class cabin.

  • On March 2, Emirates made the world's longest commercial non-stop flight by distance between Dubai and Auckland. A double-decker Airbus 380, the world's largest passenger plane, flew 14,200km in 16 hours 24 minutes.

  • Fare comparison
     

    SINGAPORE-LONDON ROUND TRIP

    Depart: June 1, 2016

    Return: June 8, 2016

    Etihad: $1,098.10 18 hours 25 minutes One stop in Abu Dhabi

    British Airways: $1,184.90 13 hours 30 minutes Non-stop

    Qatar Airways: $1,193.90 16 hours 45 minutes One stop in Doha

    Singapore Airlines: $1,327.50 13 hours 30 minutes Non-stop

    Lufthansa: $1,339.60 16 hours One stop in Frankfurt

    Emirates: $1,545 16hrs 30mins One stop in Dubai

    SINGAPORE-NEW YORK ROUND TRIP

    Depart: June 1, 2016

    Return: June 10, 2016

    Qatar Airways: $1,462 23 hours 55 minutes One stop in Doha

    Etihad: $1,497.70 25 hours 25 minutes One stop in Abu Dhabi

    British Airways: $1,542 26 hours 20 minutes One stop in London

    Emirates: $1,621 22 hours 30 minutes One stop in Dubai

    United Airlines: $1,937.80 22 hours 35 minutes One stop in Narita

    Singapore Airlines: $2,095.80 23 hours 15 minutes, One stop in Frankfurt

    *Total travel time is for outbound flights only.

    * Airports: Heathrow in London and JFK in New York.

    * Search results are for economy fares on airline websites.

KIDMAN AND ANISTON

Plushness has reached stratospheric levels with these airlines.

Elite passengers who book Etihad's three-room The Residence suite-in-the-sky are served by a Savoy-trained butler. There is a living room, double bedroom and shower.

Last year, actress Nicole Kidman fronted a campaign by Etihad, which was established only in 2003 in Abu Dhabi and is the muscular baby among the three airlines.

Qatar Airways was launched in 1997 in Doha while Emirates, born in 1985 in Dubai, is the oldest and biggest airline of the three.

Emirates' aircraft, too, are equipped with onboard showers. Last year, actress Jennifer Aniston appeared in a cheeky advertising campaign where she had a nightmare about a shower-less flight, presumably aboard a no-frills American legacy airline that served packets of peanuts.

All three Gulf airlines sell luxury travel and are constantly collecting accolades.

Qatar Airways was crowned Airline of the Year in 2015, 2012 and 2011 by Skytrax, which confers the Oscars of aviation based on passenger polls.

Singapore Airlines is consistently in the top three positions. Last year, it was runner-up to Qatar Airways while Cathay Pacific was voted third.

COMPETITIVE PRICING

Frequent fliers note that the Gulf carriers have made their reputation on pampering customers while offering competitive fares.

In January, Qatar Airways offered discounts of up to 45 per cent and two-for-one companion fares for business and economy fares to more than 150 destinations. The promotion has ended.

Mr Thomas Ng, managing director of Paveway Explorer Holidays, has flown mainly Emirates on his personal and business travels for the last three years. He cites the quality service, easy connectivity and attractive prices.

"Singapore Airlines is a good airline, but not cheap for independent travellers,'' he says.

GEOGRAPHICALLY BLESSED

The success story of the Gulf carriers is built on underlying assets, some of which competitors can do nothing about.

The Gulf region is geographically blessed, with four billion people living within an eight-hour flight time of the Gulf, including Singapore residents.

This means excellent connections to Europe, Africa and elsewhere in the Middle East.

"With Singapore so far south, the Middle East hubs of Dubai, Doha and Abu Dhabi really make sense as a gateway to the world," says Mr Andrew Wong, regional director of TripAdvisor Flights.

The Canadian works with airlines and online travel agencies to provide travel options, prices and itineraries for TripAdvisor users.

Oil is another signature asset. Singapore Management University's aviation specialist and assistant professor of strategic management Terence Fan says: "The high oil prices in the past decade or so helped fuel the economy in the Middle East and that stimulated the rapid ascendance of these airlines."

Aviation is integral to the second wing of Gulf economies that have overwhelmingly been built on oil.

Five-star airlines also embody national pride: they put their cities on the global map.

Etihad Airways, at just 12 years old, is seen as the fastest-growing airline in commercial aviation history.

While competitors build networks using their own aircraft, Etihad Airways savvily supplements organic growth by buying minority equity stakes in airlines and crafting codeshare partnerships. It has stakes in seven carriers including Virgin Australia, Alitalia and Air Seychelles.

YOUTHFUL FLEETS

The three Gulf airlines are also distinguished by young fleets.

The average age of Qatar's fleet is under four years. For Emirates, it is just over 6 years.

Etihad says its planes are among the world's youngest, with online plane-spotters estimating the average age to be around 5.8 years.

The average age of the Singapore Airlines fleet, calculated in January before the rollout of the A350 this month, is seven years and six months.

Analysts consider fleet age of six to seven years as relatively young.

In contrast, the oldest fleets are North American. The average age of United Airlines and Delta Air Lines planes, for instance, is a mature 15.8 years.

Passengers get better value from a new plane.

TripAdvisor's Mr Wong says: "Typically, the newest planes will feature an airline's newest onboard products such as latest business class configurations, newest economy class seating, mood lighting and the latest inflight entertainment.''

Overall, new aircraft are more efficient and economical to operate, which is better for the airline's bottom line too.

Singapore Management University's Prof Fan points out that more essential than fleet youthfulness are good maintenance practice and pilot training.

"I believe Singapore Airlines has both,'' he says.

SINGAPORE AIRLINES NOT DOCILE

Singapore Airlines is not docile amid the competition.

A spokesman says: "While it is true that the Middle East carriers have emerged in recent years, they are not the only competitors and Singapore Airlines has not sat still in the face of the challenges."

Its network will grow this year. Flight frequency to Thailand, Italy and Sri Lanka will increase.

Dusseldorf will be the third German city to join the route network after Frankfurt and Munich. New services to Canberra, Australia, and Wellington, New Zealand, will be introduced.

Together with its airline partners, Singapore Airlines serves 280 destinations in 76 cities.

Its touted "portfolio" strategy is serving it well.

The airline spokesman adds: "Tiger Airways and Scoot provide synergies to each other at the budget end of the spectrum and Singapore Airlines and SilkAir provide feed to each other at the premium end.''

"HIDDEN" SUBSIDIES

Rival airlines have charged the Middle East carriers with unfair competition.

America's three biggest airlines - United Airlines, Delta Air Lines and American Airlines - contend that the state-owned Gulf carriers have powered their quick expansion in the United States with US$42 billion in "hidden subsidies" from their governments over a decade.

This allegedly includes low-interest loans, below-market leases for home airports and jet-fuel subsidies.

When European Union transport ministers gathered in March last year, the German and French ministers warned of the distorting effects of Gulf subsidies, according to media reports.

Adjunct professor Rob Britton from the McDonough School of Business at Georgetown University, wrote in a blog last year: "Lufthansa's biggest hub, Frankfurt, has lost nearly a third of its market share on routes between Europe and Asia since the entry of the Gulf carriers and, as a result, has had to cut flights to more than 20 cities in Africa, South-east Asia and the Pacific."

There is a prevailing sense that profits are not of imminent importance to the Gulf airlines, though Sir Tim Clark, president of Emirates, has said that Dubai's rulers told him to "always make a profit" when he started the airline in 1985.

The Emirates group reported its 27th straight year of profits for the financial year ending March 2015. It achieved profits of US$1.5 billion, up 34 per cent from the year before. Revenue was US$24.2 billion, up by 7 per cent.

Etihad produced its strongest financial results so far in 2014, posting a net profit of US$73 million on total revenue of US$7.6 billion. Profits rose 52.1 per cent and revenue moved up 26.7 per cent over the previous year.

Qatar Airways chief exective Akbar Al Baker said in June last year that the airline made a net profit of US$103 million in its last financial year, according to media reports.

The fiery leader, who was also instrumental in the construction of the elegant, retail-rich Hamad International Airport in Doha, said at a Washington news conference last year that the US airlines attacking their Middle Eastern rivals were driven by greed and provided "crap service".

Etihad, too, responds robustly to naysayers. A spokesman tells The Straits Times:"Etihad Airways receives no government subsidies or sovereign guarantees and, contrary to the claims of some competitors, it does not receive free or discounted fuel or airport services in Abu Dhabi, its home and global hub."

TAKING A BUS

Weighing in, Mr Dean Wicks, chief flights officer of Wego, a leading travel search site for the Asia-Pacific and the Middle East and North Africa region, says it can be argued that the American airlines have enjoyed government subsidies with bankruptcy protection.

What the US carriers can do is to raise their game, he says. "To Americans, flying is like taking a bus."

Mr Simon Elsegood, senior aviation analyst (Middle East and Africa) at the Centre for Aviation in Sydney, says the Middle Eastern airlies have succeeded due to a matrix of factors.

"They benefit from a combination of aviation-friendly investment and regulatory decisions by their local governments, aviation liberalisation efforts, their own aggressive fleet expansion focusing on the most modern and efficient types, the rapid growth of Europe- Asia travel and a low-cost base."

That enviably low-cost base is shaped by their business models and the legal structures of their home markets, particularly in tax and labour policy, he notes.

In the mid-2000s, there were media reports that pilots working in Asia were being poached by Middle Eastern, Indian and Chinese carriers.

Analysts say that the Middle East airlines look for experienced international crew to man lucrative intercontinental flights. This makes better business sense than training new cockpit crew.

Airline staff are attracted to the solid housing allowances and zero income-tax regimes in the Gulf.

For travellers, all this competition means choices galore: a range of airfares, flight schedules, connections, destinations and inflight service.

From the Gulf hubs, modern aircraft can fly non-stop to most cities in Europe, Asia, Africa, Australia and likely New Zealand, North and Central America, as well as much of South America.

Prof Fan says: "Travellers criss- crossing between many of these regions need not detour significantly when making a flight connection in the Middle East. The Middle East is, therefore, well positioned to be a super hub of the world."

For passengers focused on comfort, a couple of concerns are night- time flights and economy seating on Gulf flights.

On a night-time flight from Singapore to Europe, passengers disembark and embark in the middle of the night in Gulf airports.

It is more restful on a non-stop flight, Prof Fan adds.

None of the three Gulf airlines have premium economy cabins.

Economy seats on the Emirates 777-300ER can be among the smallest as well. The seat width is 17 inches wide, compared with a similar Singapore Airlines jet with cushier 19-inch (economy) and 19.5-inch (premium economy) seats.

Looking ahead, the competition will only sharpen.

Aviation analyst Mr Elsegood points out that the Big Three of the Middle East collectively have about 565 wide-body aircraft on order.

He says: "Compare this with just 300 to 310 wide-body aircraft on order for all North American carriers combined and around 420 wide-bodies on order for all European carriers, and you can see how the Gulf region is going to play an ever more important role in long-haul international travel."

MEMORABLE JOURNEYS

Singapore Airlines can still fly high in the face of the intense competition.

Analysts say the carrier can emphasise its restful flights, quality service and safety, and continue to invest in the best flight experience.

This month, the airline announced a new first, the "companion app", which lets customers create pre-selected favourite lists for inflight entertainment using their personal devices before boarding. The service will begin with the new A350s.

Start-up entrepreneur Deepak Gurnani, 55, who has flown Qatar Airways and Emirates, sings their praises unreservedly: "At the airports, the connectivity is excellent and the shopping is lovely. They have made transit time pleasant.''

On board, the service can outshine Singapore Airlines, even in economy class, he adds.

The Gulf crew serve champagne and chat with passengers. "What gives them an edge is a memorable journey," he says.

Singapore Airlines staff sometimes give the impression that they serve out of duty. "It's mundane and not creating memories," he adds.

But intangibles count. He still takes Singapore Airlines flights every often although the fares are 10 to 15 per cent higher than those of its Gulf counterparts.

The Singapore Airlines customer of 30 years says he has never been overbooked on the national carrier, unlike twice on Emirates.

"The moment I step onto a Singapore Airlines plane in Heathrow Airport in London, I feel that I'm home."

•Follow Lee Siew Hua @STsiewhua


1. DESTINATIONS

Emirates: More than 150 Etihad Airways: 116, or nearly 600 with airline partners

Qatar Airways: More than 150

Singapore Airlines: 280, with airline partners

Lufthansa: 271, for Passenger Airline Group comprising Lufthansa Passenger Airlines, Swiss and Austrian Airlines

Cathay Pacific: 187

2. FLEET

Emirates

Number of planes: 250

On order: 262

Average age: Just over six years

Etihad Airways

Number of planes: 121

On order: 188

Average age: Estimated 5.8 years

Qatar Airways

Number of planes: 176

On order: More than 320

Average age: Under four years

Singapore Airlines

Number of planes: 107

On order: 67 A350-900s and another batch of A380s to arrive from next year

Average age: 7.5 years

Lufthansa Group (including Lufthansa, Swiss, Austrian Airlines and Germanwings)

Number of planes: 615

On order: 263

Average age: 11.5 years

Cathay Pacific

Number of planes: 146

On order: 70

Average age: 7.9 years

3. AWARD HIGHLIGHTS

Emirates

Aviation Company of the Year in 2014 from Aviation Industry Awards.

Etihad Airways

World's Leading Airline 2015 at the World Travel Awards for the seventh consecutive year.

Qatar Airways

Airline of the Year in 2015, 2012 and 2011 at the Skytrax World Airline Awards.

Singapore Airlines

Reputedly the world's most awarded airline, including Best Overall Airline in the World 2015 award (11th time) from Global Traveler (USA).

Lufthansa

Europe's Leading Airline 2015 at the World Travel Awards for five consecutive years.

Cathay Pacific

Best Transpacific Airline at Skytrax World Airline Awards last year.

A version of this article appeared in the print edition of The Sunday Times on March 13, 2016, with the headline 'Flying high'. Print Edition | Subscribe