How the UAE-Israel deal could impact on Middle East aviation

Linus Bauer, managing director and founder of Bauer Aviation Advisory, thinks that improved relations between the two states will benefit UAE carriers
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El al, Emirates, Etihad

The normalisation of ties between the UAE and Israel will lead to opportunities including direct flights, tourism, health tourism and business activities.

From my point of view, the UAE carriers are likely to benefit the most from the historic deal than Israel’s national carrier El Al. The historic deal will gain a new stream of travellers that could help the hubs Dubai and Abu Dhabi partly bounce back from the COVID-19 crisis.

The ongoing airspace blockages mean there will be fewer benefits for Israeli carriers – and Israeli-registered aircraft – in the near future.

The UAE's gains could prove to be a setback for Qatar Airways in this case, as well. It is highly unlikely that the State of Qatar will establish diplomatic ties with Israel in the near future. For Turkish Airlines it could be also bad news, as they have provided those profitable connections (Tel Aviv - Istanbul - Asia) in the past decade.

According to data collected from OAG, over 1.9 million were carried between Tel Aviv and Asia, Africa and Australia last year. The direct access to a new market like Israel with a large Jewish diaspora across the globe could help Emirates and Etihad to restore their sixth freedom international network via their hubs during the COVID-19 recovery (Israel - UAE - Asia/Africa/Australia).

The financially weak carrier El Al could maintain its focus on the core key markets with higher yields (Israel-US and Israel-Europe) for kickstarting the decisive recovery process in the upcoming months (subject to the arrangement of a new financing plan with investors and stakeholders). 

Due to political, geopolitical and security-related reasons, El Al operates in an almost entirely point- to-point market, leading to an entire absence of hub-and-spoke traffic at Tel Aviv (e.g. Europe – Israel – Asia/Australia/Gulf).

It leads to another key challenge for El Al to “cherry pick” demand between two cities throughout the whole year. From the economical point of view, the increasing security-related costs in Israel has to be considered as one of the additional threat to the economic feasibility of cost-intensive (ultra) long-haul services between Israel and Asia/Australia.

El Al spends up to US$110m a year to conform with the airline’s security measures required by Israel’s security service. In other words, the security-related costs per passenger are approximately 10 times higher than in the US (post 9/11). El Al’s constant struggle to be a profitable airline business is partly caused by operating in a very costly environment.

The restriction on flying during the Jewish Shabbat has to be also considered as another operational challenge for El Al with the intention to operate ultra-long-haul flights to Australia. During Shabbat, El Al flights have to land by sunset on Fridays and are not allowed to depart on a Saturday.

Technical delays or events (e.g. AOG) that have run into Shabbat would force El Al to cancel flights. It would have a negative impact on the premium customer experience and thus decrease in demand for direct services with the Israeli carrier.

From the ongoing airspace blockades to its ‘self-imposed’ Shabbat restrictions and its entire point-to-point network (no feeder traffic at any end), El Al would face a unique set of challenges if they intend to operate (ultra) long-haul flights to Asia and Australia (bypassing Gulf hubs).

Approximately 69,400 passengers flew between Tel Aviv and the wider Middle East region in 2019 (OAG, 2020). The Middle East traffic was led by Dubai (13,181), Doha (2,610), Jeddah (2,524), Abu Dhabi (2,087), and Beirut (1,438).

Those passengers – of whom the majority were Arab citizens of Israel/Palestine) – were primarily served by Royal Jordanian via Amman, with Turkish Airlines via Istanbul second-placed.

In pre-COVID-19 times, Tel Aviv – Amman was served up to 18 times weekly by Royal Jordanian, with an estimated 81% of its Tel Aviv passengers connecting onward via Amman (e.g. Tel Aviv - Amman - Dubai, Tel Aviv - Amman - Bangkok, and Tel Aviv - Amman - Hong Kong).

The historic deal could boost traffic between the UAE, Israel and beyond (subject to COVID-19 developments in the near future). A non-stop link between Tel Aviv, Abu Dhabi and Dubai would be crucial for the stimulation of more point-to-point traffic (local traffic) for EK and EY in the post COVID-19 era since their entire hub-and-spoke business model has been compromised by the current pandemic.

The same potential for direct links applies for cargo/freight. And the UAE carriers, Emirates and Etihad Airways, could benefit from the other airlines' above-mentioned disadvantages.

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