Can Gulf carriers compete against the rise of ultra-long-haul?

Linus Bauer, managing director of Bauer Aviation Advisory, argues why the emergence of ULH does not necessarily mean the decline of super connectors
If Qantas' ULH venture, Project Sunrise, goes ahead, it will use A350-1000 aircraft.
If Qantas' ULH venture, Project Sunrise, goes ahead, it will use A350-1000 aircraft.

Covid-19 has sent shockwaves throughout the aviation industry. Cash-strapped airlines have either gone bust, sent into administration or in search for a new lifeline in the form of a government bailout to increase liquidity and survive.

People are more reluctant to travel, seeking to reduce their exposure to the virus along with balancing the risk of being restricted by quarantine measures. Therefore, it’s unsurprising IATA says the Middle East is forecast to see a 56% drop in the number of passengers in 2020, a trend likely to lead to air travel’s overall decline over the coming years.

It’s with this bleak picture that airlines in the Middle East must quickly respond to the changing characteristics of the marketplace to establish a competitive advantage once international air travel makes a meaningful rebound.

As founder of Bauer Aviation Advisory and a visiting lecturer at City University of London in Dubai, I’ve analysed the commercial performance and economics of the top Middle East carriers. Through a recent academic study, I examined the emergence of ultra-long-haul (ULH) flights and concluded they have increasing potential to thrive in a post pandemic era.

As people, we love convenience. Whether it’s ordering groceries from an app, making purchases online or taking the fastest route home, it’s the speed and efficiency in getting what we want, when we want it that appeals to us most.

ULH flights, lasting more than 14 hours nonstop between two major global cities, are more efficient, and could offer airlines a competitive advantage. In its first year of service, Qantas’ nonstop Perth-London route, covering a distance of 14,000 kilometres, flew 94 percent full and carried 155,000 passengers, emphasising the popularity of this groundbreaking ULH route.

But it’s not just shaving a few hours off the travel time where this model has the advantage, it’s also the notion of safety, reducing the risk of exposure to the virus for passengers during layovers, and on ULH flights.

Since Covid-19 became a familiar threat to us worldwide, governments, businesses and individuals have taken the necessary precautions to reduce transmission. The UAE’s robust response has been exemplary, settling nerves at a time when people are more health-conscious than ever before.

But ‘super connector’ hubs, including Dubai and Abu Dhabi, could lose out in future as health-conscious passengers and elderly people could choose to pay the premium for convenience, bypassing these hub airports altogether.

Where does this leave the Middle East’s top carriers?

Emirates maintains its dominance in long-haul travel based on a model rooted in connecting Dubai with the world, but also bridging the gap between East and West, with its vast fleet of Airbus A380s and Boeing 777s.

As a region with a razor-sharp focus on shaping the future through visionary leadership, the UAE and Saudi Arabia in particular, have landed major global events of strategic importance, including the upcoming 2020 G20 Riyadh Summit in Riyadh and Expo 2020 Dubai next year. For mega-events like these to be successful, global connectivity is essential.

Despite the emergence of ULH flights, the concept is not new for Emirates and Etihad. A typical flight between Abu Dhabi and Los Angeles would take around 16 hours. Even for Australians traversing the globe from Europe to get home would include up to a 14-hour nonstop flight from Dubai. The recent spell of repatriation flights and cargo services from the UAE to other parts of the world during the pandemic also reinforces this.

Emirates will introduce the Boeing 777X and Boeing 787-9 Dreamliners to its fleet mix – both of which are easily capable of ULH flight operations between continents, if configured accordingly.

But as we’re not expecting air traffic levels to recover for several years, the smaller Boeing 787 Dreamliner will add greater flexibility to Emirates’ fleet in the event of a sudden shock that impacts demand.

Conversely, despite changing traffic flows, the Middle East’s major carriers will always benefit from the region’s strategic geographical advantage, being one flight away from anywhere on the globe, which can never be underestimated.

As we have seen with existing ULH routes, air fares have been charged at a premium. This is because airlines have fewer seats to fill which invariably pushes up the cost of flights over long distances to cover the cost of the operation.

That said, the Middle East carriers, with their strong global brand recognition, quality product and extensive global network, can remain relevant against the emerging threat of ULH flights by providing a connecting flight cost advantage for consumers.

This is the opportunity for the Gulf carriers. If these carriers price fares competitively, there will be customers willing to pay less for a connecting flight as ULH flights will remain a premium product with premium pricing, targeting higher spending premium customers.

The Middle East’s carriers should capitalise on affordability but more strategically, consider the use of modern, fuel-efficient long-range aircraft with smaller capacity that can serve nearby regions to feed passengers onto their long-haul services.

An exciting prospect is the normalising of relations between the UAE and Israel. The large Jewish diaspora in Australia could potentially benefit from efficient access to Israel via the UAE.

Ultimately, the Middle East’s ‘super connectors’ can effectively compete with ULH travel. But its commercial approach should really consider the psychology of today’s health- and cost-conscious passengers to fly ahead into the future alongside trailblazing ULH routes.

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