Route development in the Middle East and Africa faces a difficult few years but new network models and infrastructure development will help airlines to thrive in a rapidly changing industry, writes Graham Newton.
For many years, it seemed as if the “Big Three” from the Middle East – Emirates, Etihad and Qatar Airways – could do no wrong. Every day brought more aircraft, more destinations and more money.
But times change. The Big Three are no longer so bullish in their outlook and all are having to confront some major issues.
Emirates must contend with the cancellation of the Airbus A380 programme. Though the aircraft will continue to fly – and be supported by Airbus – for many years to come, it was Emirates that effectively signed its death warrant.
Too many questions had started to surround an aircraft that was conceived in the late 1980s. Chief among them was why use four engines. That’s two too many for most in the modern industry. The extended range and lower cost base available to modern two-engine aircraft is such that a large gas-guzzling plane no longer makes economic sense.
Coupled with this is the decline of the hub-and-spoke model. Point-to-point is winning the network strategy battle, backed by customer demand for frequent, direct services.
In February 2019, Emirates decided to take Airbus A330s and A350s while reducing its A380 order, indicating a new direction in the airline’s network strategy. Tim Clark, President, Emirates, has made several comments in this regard. A case in point is his admission that there is a “temptation” to do more fifth freedom flights with services from Athens and Milan to New York performing strongly.
It is expected that Emirates will also better integrate with sister carrier FlyDubai, increasing the effectiveness of the respective networks as much as possible.
The clamour for point-to-point services means network problems also affect Etihad and Qatar Airways. Qantas’ London-Perth route and its planned connection between Europe and the west coast of Australia – known as Project Sunrise – mean the extremely important kangaroo route will be able to jump over the Middle East.
This is only adding to Etihad’s woes. It has lost close to US$5 billion in recent times according to reports, as its equity share strategy suffered. Investments in Alitalia and airberlin were particularly affected.
Not only has the Etihad portfolio taken a hit but also Abu Dhabi has never really challenged Dubai as a global connector. Etihad Group chief executive Tony Douglas has some tough decisions to make.
“At Etihad we are focused on optimising our network and fleet,” he said recently. “With regards our global network, the main focus will be a push for greater point-to-point traffic from existing and emerging markets to and from Abu Dhabi.”
As for Qatar Airways, it is still being affected by a blockade on its home nation that shows no signs of abating and forces its aircraft to make costly detours. This has only aggravated the airspace issues that have continually dogged the Middle East. Wars in Syria and Yemen restrict availability in a region already constrained by military activity. More recently, geopolitical tensions involving Iran have complicated the picture even further with the Strait of Hormuz now being avoided.
From the major Middle East hubs, all points of the compass bring airspace issues. So, even though there are liberal aviation policies and some of the world’s leading airports on the ground, it is the not-so-open skies that could constrict route development.
Despite these challenging trends, there is plenty of new route activity in the region. In what could be an extremely important development, Ryanair is dipping its toe into the market with flights from Paphos International Airport in Cyprus to Beirut in Lebanon.
Meanwhile, Kuwait’s Jazeera Airways is looking to extend the low-cost connection even further to Western Europe. Jazeera Airways CEO Rohit Ramachandran has noted: “We’ll be launching a Kuwait to London service later this year. This will be on an A320neo. Later, there will be two routes into Turkey. And later still, flights to Nepal, Bangladesh and Abu Dhabi.”
Overall, the International Air Transport Association (IATA) predicts a combined net loss of $1.1 billion for Middle East carriers in 2019, following on from a similar deficit in 2019.
“The region has faced substantial challenges in recent years, both to the business environment and to business models,” IATA states. “Airlines there are going through a process of adjustment and announced schedules point to a substantial slowdown in capacity growth in 2019. Performance is now improving but the worsening in the business environment is expected to prolong losses in 2019.”
One area of activity for the Middle East hubs and airlines that has always provided good business is African connectivity. Surprisingly, for many Africans looking to travel within the continent, flying via the Middle East is often the best, perhaps even the only, option.
The challenges in intra-African connectivity have many causes – the need for visas, which can be an expensive and time-consuming business being just one. According to the Visa Openness Index, Africans need visas to travel to 51% of other African countries.
Albeit slowly, that figure is coming down – from 55% in 2016. There is a growing desire to find solutions to visa and other pan-African issues. Rwanda, for example, now provides visas on arrival for all African citizens. The success of this policy can be seen in increasing direct foreign investment into the country and the rising star of its capital, Kigali, in the conference world.
Aviation infrastructure is also on the up. Top of the list of proposed airport projects is a new facility at Addis Ababa in Ethiopia – a busy hub – although details are scant.
In Africa generally, there are many years of under-investment to reverse but China has been especially active in providing funds and expertise. Airports in Kenya, Mauritius, Mozambique, and Sierra Leone are among those that have benefitted from China’s largesse.
New routes between China and Africa have been developed as a result with some sources citing a 630% jump in connectivity in the last 10 years.
Moroccan flag carrier Royal Air Maroc is reportedly planning to connect Casablanca and Daxing Airport in Beijing later in 2019, for example, and Shanghai Pudong and Guangzhou routes may also be on the cards for the carrier. Interestingly, Morocco launched a visa exemption for Chinese citizens in 2016.
In terms of African airspace, the Mombasa Roadmap should improve matters. It will enhance the seamlessness of African skies through collaborative decision making and air traffic flow management initiatives.
The final ingredient necessary to cook up greater success for African route development is closing the skills gap. For aviation on the continent to reach its full potential, the creation of a skilled and sustainable workforce is essential.
IATA is pushing new training programmes to assist the region. “New technologies are spawning new ways of working and we cannot easily predict what tomorrow’s jobs will entail,” said Muhammad Ali Albakri, IATA’s Regional Vice President for Africa and the Middle East. “But preparing the next generation with the capacity for lifelong learning will allow them to adapt to a rapidly evolving economy.”
Recent route development in Africa points to a brighter future for intra-continental flights. Egypt Air has just started operations to Douala, Cameroon, the third new African destination for the airline this year following the start of services to Rwanda and Côte d’Ivoire. And Air Tanzania has launched a Dar Es Salaam-Johannesburg service. The Tanzanian carrier has also begun flying to Mumbai in India using a Boeing 787-800.
How that latter route fares will be noteworthy. African carriers sometimes struggle to attract international travellers. Even though they pass the same safety tests as other airlines and often operate new aircraft, there can be a perception problem.
This will need to be overcome. African airlines have a real need to break into inter-continental markets. Though their breakeven load factors are lower than the global average, achieving just 60.7% in 2018 means they still didn’t do enough. This led to a combined loss of US$0.1 billion.
Reasons to be cheerful
Both the Middle East and Africa have challenges ahead. And it looks as though it might get worse before it gets better. The recent disruption to British Airways and Lufthansa flights to Cairo highlights the continuing tensions.
Nevertheless, looking further ahead, there are reasons to be optimistic. The Middle East has both the political will and the financial clout to overcome short-term obstacles and Africa has such overwhelming potential that it cannot be ignored. China’s increasing interesting provides evidence of this.
But to exploit the desire for air connectivity, commercial changes will need to be accompanied by more concrete development. In particular, African governments will need to follow in the footsteps of Middle Eastern aviation policies to promote air transport.
With a following wind, route development in both regions could take flight.