Oussama's Take

Expansion by Acquisition, A New GCC/MENA Trend

2012-01-26T09:51:00.001+04:00

Etihad Airways just announce its acquisition of a 40% stake in Air Seychelles for US$ 20 Millions. As a result the flights to Mahe will increase from four (4) weekly to daily and several European flights out of Abu Dhabi will carry a joint flight numbers in addition to the presence of Air Seychelles in Etihad sales offices. This follows Etihad's 29.2% stake in Airberlin a month ago.

Not to be left out Qatar Airways has announced that they have selected a target airline in Europe for a major equity stake to be announced in due time. Qatar Airways already has a 35% share of Cargolux.

THY Turkish airlines is interested in LOT polish airlines.

It is worth remembering that Emirates had a 40% stake in Air Lanka for 10 years with a management contract which was terminated in 2008 and Emirates subsequently sold its shares back to the government.

2012 An Exciting Beginning

2012-01-24T17:49:00.000+04:00

The Chinese New Year is upon us and the Year of the Dragon is supposed to be much better than last year.
Well, it looks like it maybe so. January has been an interesting month with lots of exciting news for the region.

The opening of the Saudi Domestic and International market tops the list. The Kingdom of Saudi Arabia is a large market with a population of 27 Millions and 27 domestic airports, effectively served domestically by two airlines; Saudi Arabian Airlines, the national carrier and NAS Air a low cost carrier. As early as April 2011 General Authority of Civil Aviation (GACA) has declared its intention to liberalise the market in order to better serve the consumers by allowing foreign airlines especially those from the GCC to operate domestically and internationally subject to bilaterals. This January GACA declared that by April 2012 they will issue an RFP for interested airlines wishing to participate. In the meantime airlines like Emirates and Gulf Air among others have shown interest and are in discussion with the authority.

Qatar Airways has indicated that they have identified a European take over target, but they are not saying which airline (maybe Czech Airlines). keeping in mind that the airline has acquired 35% of Cargolux last year and right after Etihad's 29.21% in AirBerlin, who by the way inaugurated their first flight into Abu Dhabi on 16 January 2012. It appears that THY Turkish Airlines maybe interested in acquiring LOT Polish Airlines.
That will make a total of five (5) airlines in Europe that have been bought (BA/BMI) or a large stake acquired in them (Qatar Airways/Cargolux and Etihad/Airberlin) or are targeted.

On a more sobering note, Gulf Air ruled out its privatisation effort for the time being due to the events in Bahrain and it will probably be looking for the Saudi market to improve its financial position. This is a reversal of the trend of privatising airlines in the region, keeping in mind that Kuwait Airways privatisation was put on hold in October 2011pending restructuring of the airline.

2012 maybe a tough a year but for sure it is going to be an interesting one.

2012 ... A Tough Year

2012-01-21T19:39:00.001+04:00

Is 2012 going to be a repeat of 2011? The chances are yes. Not much has changed except a lot of issues of 2011 are going to be resolved one way or another. The uncertainty that prevailed in 2011 is still with us and in some cases it is getting worse.

2012 is full of geopolitical issues affecting the region
- Tunis, Egypt, Morocco and Libya will be governed by Islamists, who for decades were in the opposition.
They will face the test of governing, the realities of the world and the well being of their people and
economies. With the exception of Libya the other three depend heavily on tourism and the test will be the
balancing act between beliefs and pragmatism.
- Syria remains a problem with no apparent solution in sight in the mean time casting shadows on Lebanon.
- Yemen is still the same with very little movement in spite of the accords signed in Riyadh.
- Iraq seems destined to even more political instability that may end up in its break up.
- Iran's threats to close the Straits of Hormuz could lead to a major conflict coupled with the nuclear
capability problem with Israel threatening to bomb Iran's nuclear installations.
- The Palestinian Israeli conflict that keeps worsening with the intransigent position of Israel relative to the
Peace Process and Palestinian Statehood.
- The Euro zone debt crisis deepens with the downgrading of France, Austria and others including the
European Financial Stability Facility (ESFS) leading Europe into recession and potential country defaults
affecting tourism to the region.

On the other hand there are some good news
- Dubai and Abu Dhabi are developing into destinations of their own attracting more and more visitors.
- Saudi Arabia is embarking on an interesting experiment in airline liberalization by allowing GCC and other
foreign airlines to operate domestic and international flights from the Kingdom.
- The airlines of the region are still expanding into new markets mainly South America, Africa and the CIS.
- Cargo operations are on the rise and with the reconstruction in Libya and hopefully Iraq will cause an
increase in regional cargo operations.
- GCC airlines are expanding by acquisition with Etihad and Airberlin following Qatar Airways and Cargolux
in 2011. Qatar Airways indicated that they have identified a target airline in Europe for acquisition. Who
knows, Royal Jordanian may revive the plans of a merger with an airline a la Air France/KLM model.
- India is allowing Foreign Direct Investments (FDI) in its ailing airlines and hopefully more restructuring
of the industry. India remains a large and expanding market that attracts not only Oneworld and Star
Alliance but every GCC airline.

In a nutshell nothing changed from 2011.
- The capacity of the MENA/GCC airlines will increase and so would their networks through additional
aircraft deliveries and mergers and acquisitions.
- Kuwait Airways will hopefully restructure.
- Saudi Arabia will launch its new initiative allowing regional airlines to expand within the Kingdom by
operating domestically and internationally and allowing carriers to serve more and more destinations.
- Cargo is assuming a higher importance with airlines like Emirates, Etihad, Qatar Airways and Royal
Jordanian.

Will the airlines of the region make profits, probably if everyone in the neighborhood behaves.
"Plus ca change, plus c'est la meme chose" (The more things change, the more they remain the same).

Wishing you all a prosperous and safe 2012.

EU ETS .... Is It Worth It

2012-01-13T13:34:00.000+04:00

The EU seems ready to bring the airline industry to a stand still over the Emission Trading Scheme (ETS).

ETS is not a bad idea and the airline industry should share the burden, nobody objects to that. The airline industry along with aircraft and engine manufacturers have always striven to produce more fuel efficient aircraft to meet invariably the ever fluctuating and rising oil prices and the effort is still going on with aircraft like the B787 and A350 producing efficiencies and reduction of emissions approaching 20%.

The EU has introduced an ETS that affects all airlines operating within Europe and in and out of Europe regardless of nationality or country of registry, and to add to the problem the funds levied by the EU governments do not have to be used to fund research or projects related to aviation or even the environment. It is only recommended that governments fund these projects, and with the euro zone debt crisis and a looming recession we all know where the funds will go to the general budget.

Several countries during the last ICAO meeting requested the EU to suspend its ETS and look at a global ETS that is more equitable. The EU rejected that proposal and insisted that it will go ahead with its planned scheme. The European Court of Justice rejected a law suit, that ETS infringes on the sovereignty of other nations and contravenes the Chicago Convention in regards to the taxation of international aviation, on the basis that the EU is not a signatory to the Chicago Convention, as if the EU member states are not.

Countries (China, India, Brazil, USA, Russia, Japan and the list goes on and on) opposing the EU ETS have prohibited their airlines from participating and the EU declared that they will ban any airline, not participating, from operating into Europe.

Really, and the EU thinks that the rest of the world will turn the other cheek and accept. There will be a reciprocal ban against all EU airlines., and Europe will be the biggest loser.

I am sure things will not get to that point and cooler heads will prevail and an acceptable solution will be reached, hopefully.

Airlines In India An Industry In Crisis

2012-01-09T12:40:00.000+04:00

I am not an expert on Indian aviation but I have learnt a lot following Bangalore Aviation. Two news items attracted my attention last week;

The first is Star Alliance asking Air India again to join and BA initiating procedures for Kingfisher to join
Oneworld. Considering that both airlines are financial disasters only shows the importance of the Indian market
to airline alliances. This is not surprising considering the growth rate of the Indian economy in the last few
years. The Indian economy is slowing down but it is still growing at a respectable 7% annually.

The second is the report of the DG of the Civil Aviation Authority on the state of Kingfisher and his statement that there is a reasonable case for withdrawing their AOC. Also sited in the report for safety problems are Air India Express, Indigo, SpiceJet, GoAir, Jet Airways and JetLite. In essence this is an indication of failed government policies.

The government has failed to date, to resolve the financial problems of Air India. Air India is operating at levels well below its costs while resisting all efforts of restructuring while still incurring high losses. Air India has been offering low fares driving the competition. Further, the government has failed to improve the aviation infrastructure to meet the demand of a more affluent middle class for air travel, in spite of the high taxes levied on tickets.

What is most worrying is when the top regulator in the country cites almost all the airlines in India of a "patchy track record on passenger safety"; this begs the question of the level of safety oversight the DGCA has been exercising on a day to day basis.

It is great that the CEOs of Kingfisher and Air India Express and indeed all the other CEOs to be hauled in front of the DG to be admonished for their failings and to explain their recovery plans. What is needed is for the DGCA to step up the oversight over the airlines and for the government to resolve the issue of Air India.

The Joys Of Flying With Etihad

2012-01-05T20:40:00.000+04:00

I have travelled with Etihad Airways before, they were short trips and in Business. This time I travelled to Chicago, a 15 hours plus flight going and a 13 hours plus coming back on an AA code share ticket. Of course being an AA frequent flyer did not mean anything in this case.

It is one thing calling your passengers "GUESTS" another thing meaning it. The flight to Chicago started all wrong, the itinerary said Terminal 1, but it really was Terminal 3, meaning a nice walk across the airport pulling luggage, a good exercise before a long flight.

Check in at Abu Dhabi was slow and in Chicago extremely slow with only 3 agents at check in, granted it was basically for connecting passengers, it took almost an hour before things started moving along. The staff in Abu Dhabi were "Firm" almost to the point of rudeness.

In Chicago I had the dubious honourof having my boarding pass endorsed with "SSSS". This means that the airline is asking the TSA to perform extra security checks on yours truly; probably because I asked if it was possible to change seats. In all fairness to the TSA, the extra security check went smoothly, I had an extra pat down, not very invasive, and my laptop and carry on luggage were tested for explosive traces. Needless to say, I passed with flying colors.

The boarding, both times was long. Hand luggage which was weighed prior to check in at Chicago was reweighed at boarding, or so it was announced.

The cabin crew did not smile much but were courteous but not very approachable.

This has not been my worst experience but definitely not the best. Would I do it again, probably not.

Adieu 2011

2011-12-30T17:33:00.000+04:00

2011 is coming to an end and it has been a rocky year regionally and globally.

Politically, The Arab Spring has resulted in regime changes and more uncertainty. Europe is in turmoil over the Euro debt and the USA goes from one funding crisis to another. Rating agencies have been downgrading major economies deepening the Euro Zone crisis. India is facing a weakening of its currency and a relative slow down in its GDP same as China.

In MENA/GCC 2011 has been an interesting and challenging year for the airlines and aviation.
Most airlines managed to expand and no aircraft orders were cancelled or deferred. Most of the MENA carriers managed to recover from the Arab Spring effects. Passenger numbers were comparable to 2010 if not better but yields suffered. Fuel amounted to 40% to 60% of the airlines cost however ticket prices remained at the same level in fear of losing passengers. Mega aircraft orders were made during the Dubai Air Show. Emirates became the largest B777 operator same as the A380. Etihad ordered additional B787s to become the largest operator. Qatar Airways will be the launch customer for the A320NEO after browbeating Airbus and ordering 50 firm and 30 options. Oman Air ordered B787s keeping Boeing happy.

The airlines of the region expanded into Africa, the CIS and South America in addition to the traditional markets in Europe, India and Saudi Arabia. Relatively new markets, in order to sustain their capacity growth in face of increasing global and regional political and economic turmoil.

There has been several major events during the year that will have an impact on 2012 and beyond:

Etihad increased its stake in Airberlin to 29% providing much needed cash to the European carrier and providing access to Etihad's network, just as Airberlin will provide Etihad with access to Germany and Europe.

The second event is the announcement by GACA of the completion of their proposals to allow foreign investment and regional carriers to operate domestic flights within Saudi Arabia and international flights from any point in the Kingdom. GACA does not know how successful this will be, but are willing to wait and see and then adjust depending on the response.

There has been other events such as the privatization of Kuwait Airways after its restructuring and the code share agreement between Royal Jordanian and Airberlin.

As 2011 passes away, I wish you all a Happy and Prosperous 2012

Etihad and Airberlin More Than a Partnership

2011-12-20T16:46:00.000+04:00

Etihad Airways has boosted its stake in Air Berlin from 2.9% to 29.21% and signed an extensive code share partnership that covers all Airberlin's extensive European operation and Etihad's extensive global network.

The deal provides Airberlin with needed cash and Etihad access to Germany and Europe.

Not wanting to read too much into this, one cannot but wonder about a few things:

- Etihad already code shares with AA, Malev and S7 who are Oneworld partners and now Airberlin who

will join Oneworld in early 2012, an interesting alignment with the alliance.

- This arrangement will place Etihad in the backyard of Lufthansa, Air Canada's partner in Star Alliance and

one of the greatest critics of the GCC global carriers (Emirates, Etihad and Qatar Airways). Remember the

spat between the UAE and Canada over additional traffic rights to Canada; well, maybe just maybe, this is

Etihad's quiet way of paying back. Between Emirates A380 services to Hamburg and Munich and this

partnership, Lufthansa is surely uncomfortable, to say the least.

Regardless of all the speculation, this is a win win deal with both partners benefiting and almost

makes Oneworld the preferred alliance in case Etihad is interested in joining.

The UAE 40th National Day

2011-12-02T20:35:00.001+04:00

I arrived to the UAE in May 1996 in time for the 25th National Day of the UAE; to join GAMCO.
Today marks the 40th anniversary of the country. I came at the time the Abu Dhabi - Dubai road was not yet completed. Jumeirah was not built and the old Hard Rock Cafe was literally in the middle of nowhere.

The aviation scene had two major national players Emirates Airlines and GAMCO (now ADAT) and Gulf Air was the airline of Abu Dhabi. In 1996 Emirates had a fleet of 18 Airbus A310/A300-600 and the delivery of the 7 Boeing B777 order just started in the Spring of that year. GAMCO was practically the maintenance facility of Gulf Air (GF had a 40% share of GAMCO at the time) with less than 30% of its work performed for other airlines.

Aviation has come a long way in the last 15 years; Emirates is a Global airline with a fleet of 160+ aircraft and orders in excess of 210 aircraft and Dubai International Airport is poised to become the number 2 airport in the world, and definitely the most connected airport with more than 120 airlines serving it.

I was fortunate and privileged to be a part of this success story and was directly involved with GAMCO and by extension with Etihad Airways and Air Arabia in one capacity or another.

I was with GAMCO at the time Gulf Air started facing financial difficulties in 1997 and the decision was made to decrease the reliance on GF business in favour of third party work. In 1997 GAMCO won a 5 years contract to maintain the UK RAF fleet of 9 Lockheed L1011s which was subsequently renewed in 2002. Several other European, North American and regional airlines had long term contracts for the maintenance of their fleets. GAMCO was instrumental in the launching of Etihad Airways in 2003; Etihad has become an airline with Global reach. The Etihad fleet maintenance is currently managed and performed by ADAT.

Air Arabia the first LCC of the region was also launched in October 2003 a month before Etihad with GAMCO providing maintenance support. Air Arabia is a true success story pioneering a concept in a region used to full service airlines. I joined when Air Arabia had 5 Airbus A320s and left 4 years later when they had 16 aircraft and an order of another 44 A320 aircraft. The challenge facing everyone was to sustain profitable growth and in 2007 Air Arabia launched a successful IPO for 700 million USD which was 1.5 times oversubscribed to become the first airline in the region to go public, it is listed in the Dubai Financial Market.

Of course there are other success stories like Flydubai, DAE, Strata, Sanad and Amroc to name a few.

Congratulations to the UAE, a progressive, tolerant and forward thinking country in a turbulent region.

2011 A Challenging Year - Revisited

2011-11-29T07:57:00.001+04:00

2011 A Challenging Year was written in May 2011and discussed the various challenges facing the airlines in MENA and GCC and of course globally.
Four (4) challenges were listed at the time

1. The natural disasters in Japan and the ensuing damage and problems;

2. The deepening Euro zone financial woes;

3. The political upheavals in MENA and GCC; and

4. The increase of fuel prices.

As we approach the end of 2011 three (3) out of the four (4) are very real. The world have moved beyond the natural disasters in Japan and a couple of ash clouds in the southern hemisphere.

Political and financial upheavals are still with us and will probably spill over in 2012 and the price of oil, although relatively stable at this time, is still unpredictable. Most airlines in the region including those in the India has performed well.

People still travelled and the airlines compensated by operating to new destinations;

- Air Arabia and Flydubai looked towards the CIS and specially the Ukraine among other destinations

- Several airlines started operations to new destinations in Saudi Arabia.

- Gulf Air started flying to Copenhagen, Nairobi, Milan and Geneva with Rome, Entebbe and Juba to follow

and embarked on a marketing campaign "From the Heart" in an attempt to woo back passengers.

- Royal Jordanian is eyeing Africa with a plan to operate to Lagos, Accra, Nairobi and Addis Ababa in the

near future in addition to several other destinations.

- Etihad is looking to start flights to Maldives, Seychelles, Chengdu, Dusseldorf, Shanghai and Nairobi.

- Emirates is looking at Dallas and Seattle, Lusaka, Harare, Dublin, Baghdad, St. Petersburg, Rio de Jainero

and Buenos Aires

- Qatar Airways is starting flights to Entebbe, Tiblisi and Baku in addition to increased frequencies.

All airlines have posted increases in passengers carried and in revenues coupled with a reduction in yield, including the embattled airlines in India like Jet Airways and Kingfisher.

The effects of the Arab Spring, with the exception of Syria, are subsiding in most countries and economic activities are improving or are expected to improve. The deepening Euro Zone debt crisis is taking the world on a roller coaster ride, but eventually a plan will be devised and the world will limp towards recovery.

The kicker here is the price of oil, airlines have reported increases in their fuel bill for 2011 ranging from 40% to 80%. The airlines are reluctant to increase ticket prices; on the contrary they are discounting to stimulate traffic. With Europe facing financial problems, Europeans may be less inclined to travel especially if fares increase. On the other hand, the airlines need to offset the rising fuel costs, the traditional fuel surcharge may not be the best means, fares have to eventually reflect the true cost of travel and the realities of the market.

Airlines are between a rock and a hard place, they cannot raise fares to offset oil prices for fear of losing traffic.

This will probably be the biggest challenge of 2012

Etihad Airways Eighth Anniversary

2011-11-13T17:44:00.001+04:00

This is not meant to be a chronological history of the airline, but my impressions as someone who was involved with the starting of the airline.

Etihad Airways flew on 5 November 2003 from Abu Dhabi to Al Ain and then on 12 November flew its frst commercial flight to Beirut. At the time the airline had Beirut, Damascus and Amman as destinations. Etihad Airways has expanded at a relatively faster rate than its competitors Emirates Airlines and Qatar Airways. The airline started with 2 Airbus A330s leased from TAM and an A340 leased from Boeing to a fleet of 63 aircraft (100 on order) serving 63 destinations in 43 countries and a cargo operation serving 14 destinations.

Very few people know how Etihad Airways started. The Amiri decree forming Etihad Airways was issued in July 2003, also appointing HE Dr. Sheikh Ahmed Bin Saif Al Nahyan as the first Chairman of the airline. He also was the Chairman of GAMCO now ADAT.

GAMCO's commercial, legal, contracts and finance resources were mobilized to set up the initial business plan and proceed with the AOC. Two aircraft were leased from TAM and then one A340 ex Singapore Airlines from Boeing. An MRO team of engineers and technical personnel had to become the start up team for the airline. A building slated to be the training center became the head office of the airline and the team handled functions like recruitment, purchasing of catering and commercial equipment. At the time Air Arabia was starting and GAMCO was called upon to provide full maintenance and engineering support for it and Etihad which was not a problem for an MRO. One challenge was to set up airline functions like scheduling and maintenance control from scratch. GAMCO had extensive experience performing these functions for Gulf Air using GF's facilities, eventually that function was tuned over to the airline.

The airline was set up between July and November 2003 with aircraft leased and delivered and all commercial and cabin equipment provided. One challenge was the IFE system which was from Rockwell Collins a system that was not very popular in the region. Collins was called on to provide support and ensure a greater than 95% dispatch reliability of the system. A task that they performed efficiently.

Another challenge, that I was personally involved with, was providing logistics support for the A330s and the A340 at short notice. A support package was prepared and acquired from AJ Walter Aviation. The agreement was made during the 2003 Dubai Air Show.

Etihad Airways is an airline that a lot of us are proud to have been associated with it and believed in the vision that now is a world class airline spanning the globe.

Finally, everyone is dazzled with the performance of the airline that they all forget that it all began in an MRO by a bunch of engineers and technical people.

Dubai Airshow 2011 #dxb11

2011-11-12T14:59:00.001+04:00

Twitter traffic bearing #dxb11 is on the increase as we near the opening of Dubai Airshow 2011.
Dubai Airshow usually brings cheer to an otherwise depressed industry with mega orders form the GCC airlines. Expectations are high, certainly because we have been told by Emirates and Qatar Airways to expect "bombshell" orders. What they did not tell us was what are the orders.

I don't usually like to speculate, but #dxb11 is tomorrow and it is a festive occasion so why not.
Starting with the easy ones
- ALAFCO the leasing company from Kuwait announced they will order 50 A320 NEOs.

- Qatar Airways hinted strongly about additional A380s and A320 NEOs. Now, probably a
Bombardier C series order (as a pay off for getting Canada traffic rights at the time the airlines of
the Gulf were the bad guys) maybe forthcoming, someone has to cheer up Bombardier.

- Emirates will probably order some A380s (two dozen or so) and probably B777s. What will be cool
is, if they have managed to push Boeing to offer the upgraded B777 bringing the aircraft performance on
par with the A350.

Enough, so patience please, will find out in the coming few days, for sure

Qatar Airways and The Iran Connection

2011-11-05T11:09:00.000+04:00

Qatar Airways is increasing its presence in Iran. The airline added 31 flights a week to its schedule, bringing it to 52 flights from 31 flights a week, a 150% increase (read the full story). It added a new destination, Isfahan with a daily flight and increased its frequencies to Tehran, Mashad and Shiraz.

What is more interesting is the news that Qatar Airways will start domestic flights within Iran by code sharing with a local carrier (read full story) to get around ownership issues.

Iran has been suffering from sanctions which prevented it from getting spares needed for western aircraft. The safety record of Iran aviation leaves a lot to be desired, 13 incidents since 2008 (view here). Interestingly more incidents on Russian built aircraft than western ones. It is welcome news to have modern well maintained aircraft flying domestic routes. That will definitely be a boost to civil aviation safety.

Qatar Airways will commercially do very well and will be able to channel passengers away from the competition to its regional and international services out of Doha. However, politically this maybe an
enterprise fraught with danger, unless of course the Americans and Europeans have tacitly given their
agreement to this venture. No speculations here, the future will tell.

Kuwait Airways .... Privatization The Way Ahead

2011-10-31T11:14:00.000+04:00

Finally, the government of Kuwait has decided to provide the legal framework for the restructuring of Kuwait Airways as a precursor to its privatisation (read full story). The PrivComm has recommended the restructuring to the government despite the broad expressions of interest in the airline.

The recommendation does not come as a surprise, the airline has several issues ranging from chronic loss making over the last couple of decades. Staffing issues including numbers and productivity, their staff went on strike a week back for better wages. On top of that the airline is being investigated by the Government for corruption.

At last, the project is on the right track, how long the restructuring effort will take is unknown yet, but it will not be easy and probably painful.

Interesting times are ahead, as another GCC airline restructure.

The Up Side Of The Arab Spring

2011-10-19T15:17:00.000+04:00

A lot was said about the down effect of the Arab Spring on the economies of the region, tourism, investments etc... Nevertheless, the Arab Spring, Euro Zone debt crisis and oil prices have pushed the airlines in MENA to the their limit. There has been winners and losers among the airlines of course but everybody has been adversely affected.

MENA airlines are a resilient bunch and have always been able to transform adversity and challenges into opportunities.

In typical fashion the airlines kept on taking delivery of new aircraft in spite of the down turn and have looked at expansion as a means of countering their problems
- Air Arabia and Flydubai looked towards the CIS and specially the Ukraine among other destinations
- Several airlines started operations to new destinations in Saudi Arabia.
- Gulf Air started flying to Copenhagen, Nairobi, Milan and Geneva with Rome, Entebbe and Juba to follow
and embarked on a marketing campaign "From the Heart" in an attempt to woo back passengers.
- Royal Jordanian is eyeing Africa with a plan to operate to Lagos, Accra, Nairobi and Addis Ababa in the
near future in addition to several other destinations.
- Etihad is looking at acquisitions; 25% of Aer lingus and a tie up with Virgin Atlantic if the obtain a stake in
BMI and are looking to start flights to Maldives, Seychelles, Chengdu, Dusseldorf, Shanghai and Nairobi.
- Emirates is looking at Dallas and Seattle, Lusaka, Harare, Dublin, Baghdad, St. Petersburg, Rio de Jainero
and Buenos Aires
- Qatar Airways is starting flights to Entebbe, Tiblisi and Baku in addition to increased frequencies.

This is only a glimpse of the proposed expansion which comes on top of additional frequencies to existing destinations.

The profit forecast for 2011 has been increased from a 100 Million USD to 800 Million USD by IATA, as airlines started recovering from the Arab Spring and restoring flights to Egypt, Tunis and Libya. The bulk of these profits will probably be generated by Emirates with Dubai slated to become the second largest airport in the world. Definitely several airlines will reduce their earlier losses and may break even by the end of the year.

The region has survived 2011 but 2012 promises to be a tougher year.

India Joins the Club

2011-09-10T19:05:00.000+04:00

India's National Auditor declared that Emirates and other Middle East carriers should be forced to reduce their flights to save Air India (read full story here).

This is wishful thinking, not the reduction of the flights but the saving of Air India. The number of flights are controlled through bilaterals; the Indian Government is not the easiest in awarding flight authorities, a lot of these authorities were awarded to allow Kingfisher, IndiGo, Jet Airways and others to operate international flights to the Gulf region in addition to Air India, Air India Express and Indian Airlines. A forced reduction will be probably met by a reciprocal action from the various governments of the region and they will have the choice of which airline authority to revoke, my guess would be Air India's. Any reduction of flights will affect the millions of Non Resident Indians working in the region.

The Government of India should face up to Air India's problems and tackle them heads on. Competition from GCC airlines and other airlines is only a small part of the problem. Government interference, over staffing and failed policies need to be resolved. These are issues that to this date the Government does not have the political will to face.

BA Spring

2011-08-31T12:04:00.001+04:00

I flew on British Airways today 31 August 2011 from Dubai to London on my way to Detroit. It reminded of a blog I read on Innovation Analysis Group entitled "Pride in BA Brand" a campaign that is supposed to improve the battered image of BA after 2 years of fighting with UNITE.
According to IAG Blog "Central to the drive is a 90-second film addressing five decades of BA, focusing on the role of BA's role in the history of aviation. Topics are set to include British Overseas Airways Corporation (BOAC), which merged with Imperial Airways in 1971 to create the modern BA, as well as Concorde. Images of BA staff are expected to feature prominently in the campaign." This comes after an internal communications campaign designed to inspire the BA Brand in the 32000 BA staff.

For some reason BA reminded me of the MENA regimes, extolling the glorious past in order to improve a present passenger perception. It is laudable that BA is addressing its staff problems because the current problem is not a passenger perception, it is a lack of consistent performance. Staff that is not smiling, cool and abrupt. A Customer Support organisation that is failing to adequately respond to its passenger complaints. A Frequent Flyer Program that does not use emails as a means of contacting it.

Basically a staff problem, the same staff and organisation that a few years back were "the World's Favorite Airline".

Just like people in MENA, BA passengers are not interested in the past but more in the present and the future and this is what BA needs to address. BA needs to convince passengers that it is aware of the problem(s) and they are being fixed, otherwise BA might be looking at a BA Spring.

MENA Airlines, The Elusive Recovery Revisited

2011-08-07T17:54:00.001+04:00

As the world bounces from one financial and political crisis to another MENA airlines continue to grapple with the political events in Libya, Syria and Yemen. Most airlines in the region had a small to modest increase in passenger numbers, Dubai saw an 8.9% increase in H1 2011 compared to 2010 (24.6 vs. 22.6 million passengers); Etihad had a 28% increase in revenues due to a 14% increase in passengers carried and a 5% reduction in cost; Air Arabia Q2 net profit increased by 2% over Q2 2010 due to a 22% increase in revenue and Royal Jordanian posted a 39 million JOD ($55m) H1 loss in spite of a 3.5% sales increase, the loss is attributed to fuel prices which is 44% of operating cost and declining yields, yet the airline remains optimistic for the remainder of the year. Al Jazeera and Qatar Airways had passenger increases, and Gulf Air traffic is starting to recover coupled with a new campaign "Family First" that will hopefully put it on the road to recovery.

All the major players in the region continued to expand their networks and take delivery of new aircraft. Almost all the airlines introduced promotions to increase traffic during the Holy Month of Ramadan.

This is a region that is familiar with political turmoil and has always managed to cope and recover, but events in Syria, Libya, Yemen and Sudan are still taking their toll. High fuel prices and an escalating global debt crisis are major challenges.

Very few airlines outside those in the UAE will be posting annual profits in 2011.

Dubai World Central, A Vision Delayed

2011-07-23T22:20:00.001+04:00

In my previous Blog "Dubai The Brand" I wrote " As for DWC it will slowly be buried until they figure out what to do with it." I was wrong, the waiting is over, Dubai World Central's (DWC) fate is sealed.
EMIRATES AIRLINES will not move to DWC until 2025, seven years after the last upgrade, Concourse 4 of Dubai International. Currently DWC has one runway and a low cost terminal. Several cargo forwarders and an FBO are based there. The airport is connected to Jebel Ali Free Zone with an overpass that allows cargo to move between both areas without having to go through customs.

This shifts any sizable investment until about 2018. DWC Phase 2 (2018-2023) will cover the construction of another four (4) runways and a terminal capable of 160 million passengers annually and a cargo facility capable of 12 million tons annually.

The question now is what happens at DWC between now and 2018. Dubai Airports has to come up with some plans to keep the facility operational and grow the business. My guess would be to attract MROs and Aviation related OEMs to set up facilities there.

To read about Dubai Airport expansion click here

Dubai The Brand

2011-07-08T20:05:00.001+04:00

Dubai has been in the news again. A couple days back Dudai Airports announced a massive investment in Dubai International Airport (around 7.8 billion USD) to build Concourse 4 (Concourse 3 is currently under construction), upgrade Terminal 2 and increase cargo capacity by almost 30%. This will bring the airport capacity to 90 million passengers by 2018 from the current 60 million passengers.

Great news! well yes but what about Dubai World Central Airport at Jebel Ali. This was supposed to be a six runways (now 5 runways planned) airport able to handle 180 million passengers annually. The airport has one runway operational and a low cost terminal built. Cargo operation has started but operators prefer the International Airport. Passenger operation has been delayed till 2012. No airline wants to use the airport it is very far from Dubai or Abu Dhabi.

The other Bad news is the cancellation of Dubai Aerospace Enterprises of all its Airbus orders (45 aircraft. 11 A350-900 and 34 A320, worth 5.8 billion USD) and is in discussion with Boeing about the possibility of canceling their orders 56 aircraft. DAE has never risen to become a strategic business for Dubai. DAE owns Standard Aero.

How do these events affect the Dubai brand? Positively.

Financially it looks great Dubai just reduced 5.8 Billion USD of liability and is looking to reduce it further when they cancel the Boeing orders.

The expansion of Dubai Airport was associated with increased jobs in the aviation sector and a greater contribution to the GDP. As for DWC it will slowly be buried until they figure out what to do with it.

Who Is On My Flight?

2011-07-04T21:33:00.000+04:00

"Oluwaseun Noibi, 24, reportedly boarded a flight in New York last week using an expired boarding pass with someone else’s name on it. The flight crew didn’t even realize there was a stowaway on the plane until halfway through the flight, when they realized they had an extra passenger in a premium seat. TSA insists Noibi was screened properly but that it didn’t “properly authenticate the passenger’s documentation.”" Read the full blog on Elliott.org

This incident is pure incompetence and someone not paying attention. The fact that it slipped through the TSA does not absolve the airline from the responsibility of making sure who is flying on board their aircraft. All airlines check boarding passes electronically against their departure control system database to ensure all checked in passengers have boarded the aircraft.

A few airlines still have the Senior Cabin Crew Member perform a final check, at the aircraft door, of the boarding pass against the passport. It is not only for the identity of the passenger but more importantly the flight number, destination and date; followed by a quick passengers count to make sure it tallies with the manifest.

Airlines stopped doing this because they want to board passengers fast, this procedure does not delay a turnaround, Air Arabia turns around their flights in 45 minutes.

The TSA procedures are indirectly making it easier for airlines to relax their procedures. This is not a security problem, a passenger with a valid boarding pass can still get on the wrong flight. A lot of countries have security checks performed prior to Check In which ensures that the passenger has a valid ticket and is issued with the proper boarding pass.

MENA Airlines the Elusive Recovery

2011-06-27T23:22:00.001+04:00

As we approach the end of Q2 2011, airline recovery in MENA is as elusive as ever. The Arab Spring has not subsided and with no end in view; Libya, Syria and Yemen are still in turmoil with causalities recorded daily. Other countries still face peaceful protests on daily basis. Oil prices are still hovering around a $100 a barrel with no clear direction threatening to derail the global recovery coupled with a Euro zone debt crisis.

MENA airlines continued with business as usual, well almost business as usual. No new aircraft deliveries were postponed by most airlines, showing their belief that this is a short term issue and their confidence in the medium and long term positive outlook of the future. The airlines did what they did best, expand with most of the carriers in the region increasing capacity to destinations in response to seasonal (summer) demand or rising traffic and operating to new destinations.

However, all these events are taking their toll on the airlines. The UAE seems to be the least affected with the traffic increasing around 8% in Dubai and 14% in Abu Dhabi while QAIA saw a 2.8% increase in Q1.
It appears that the Global airlines (EK, EY and QR) are faring better than most. Most airlines reduced prices and introduced promotions to keep their revenues up which has caused tremendous pressure on yields. Fuel surcharges have been introduced to compensate for the high fuel prices.

Air Arabia postponed its plans for Air Arabia Jordan for the time being and several airlines reduced or combined flights to reduce the number of empty sectors.

How long would this last no one knows. For sure, a reduction of oil prices is desirable and will help reduce losses and improve margins, even a stable oil price is better than nothing (it allows for planning).

As long as violence is the response to the reform movement in some countries, the region's economies
will be adversely affected. Regimes should deal with their people in a civilized manner and respond to their aspirations. Once peaceful protest becomes the norm and reforms materialize, only then things will get better.

Social Media and the MENA Airlines

2011-06-25T12:02:00.000+04:00

The Arab Spring was attributed to the use of Social Media by the Arab younger generations. Social Media has galvanized opinions and coordinated marches and sit ins that changed regimes. Yet, MENA airlines have not tapped this resource.

It appears that most of these airlines have Info pages with no interaction with passengers or potential passengers and it is sometimes hard to figure out if the page is the airlines official page. Of the twenty one (21) airlines, that I have looked at both legacy and LCC that have Facebook pages; only four (4) have flight booking and other facilities on their pages; Royal Jordanian, Gulf Air, Bahrain Air and Etihad.

The most liked so to speak page is Qatar Airways (161200 fans) but it is not growing and that maybe attributed to their successful promotion celebrating its 100th destination.

The fastest growing is Royal Jordanian's page (53500 fans) which adds around a 1000 fans a day and is probably the most balanced page among the region's airlines. It has a lot of traffic directed from the airline which prompts comments and likes but not much customer service content that the airline should encourage.

The most interactive page with customer service issues is Air Arabia's but only has 5500 fans.

Interestingly Emirates (43000 fans) has an info page only but is not growing, Etihad (31000 fans) is not very interactive same as Gulf Air (15500 fans) even though both airlines provide booking and other facilities on their pages.

It appears the MENA airlines are not very serious about social media yet, a few of them have advanced Facebook Pages but are not very successful in promoting them to the public probably due to lack of resources..

Of all the airlines Royal Jordanian seems to take the effort seriously, they launched their efforts with an aircraft on ground tweet up with the 20 most popular bloggers in Jordan and have allocated resources to maintain the effort and it seems to be successful; around a 1000 fans per day for an airline the size of Royal Jordanian and a country the size of Jordan is no mean feat.

The New Challenges ... Manpower and Training

2011-06-20T02:45:00.000+04:00

One of the greatest challenges facing the Aviation Industry globally and including MENA is trained manpower: pilots and engineers. The Industry is losing its appeal to the younger generations to sectors in the economy that are less physically demanding, less regulated and with less expensive training requirements. With the expansion of the world aircraft fleet expected to increase in the coming 25 years by another 25000 aircraft over the current fleet of 17000, the training needs become more important. By 2026 there will be a need for an additional 480,000 technicians and 350,000 pilots to maintain and fly these aircraft. Staggering numbers, a real global challenge.

MENA will be affected, some countries less than others. Taking into consideration that the UAE and Qatar have the fastest growing fleets and networks along with the corresponding additional maintenance requirements, they will be the hardest hit. Both countries have a relatively small indigenous population that can be tapped to support the aviation sector resulting in an increased dependence on an expatriate work force. However, their traditional sources will also be hard hit, India is in need of thousands of technicians to support the existing and new aircraft orders of the airlines there and countries like Jordan, Egypt and others will be struggling to cope.

The GCC carriers need to look at their manpower requirements for the long term and figure out how they will face the challenge of ensuring a steady flow of well trained and capable workforce. Certainly the training requirements will somewhat vary for the newer generation B787 and A350. There is a real need for an innovative approach in manpower supply and the airlines should look beyond their national training schemes offered to their citizens to start including expatriates who have been residing for generations in the country or even sponsoring people beyond their borders.

The availability of well trained and efficiently capable engineers, technicians and pilots, is what will make or break an airline and to a certain extent the aviation industry in MENA and globally.

"The Cracked Record"........ Legacy Carriers vs. GCC Carriers

2011-06-08T15:57:00.000+04:00

It flared up again, the accusations and arguments and counter arguments in the IATA AGM in Singapore (click here for full story). Mr. Giovanni Bsignani the outgoing Director General of IATA called for an end of the dispute between Gulf carriers and European/North American carriers in a civilized manner. He pointed out that the solution to call governments as advocates or referees has not worked and will not work and as responsible leaders of this global industry we should find a resolution by ourselves.

Of course, Air Canada will not have any of this and the litany of the Gulf carriers being supported by their governments as if Air Canada is not the darling of the Canadian Government the only difference is that the governments of the UAE and Qatar embrace an open sky regime while the government of Canada has one of the most noncompetitive and restrictive policy (read my blog Canada's Air Transport Competitiveness) Air Canada was supported by Austrian, a subsidiary of Lufthansa that has a record of opposing entry allowed under EU open sky agreements.

The problem lies in the fact that the Legacy carriers of Europe and North America are not able to match the growth of the Gulf carriers. I agree that they are at a disadvantage but it is not caused by government, it is caused by location, location location. The Ultra Range aircraft shifted the geographical center of aviation from Europe to MENA and the Gulf and allowed the carriers of the region to become real global airlines. The UAE and Qatar have always been open economies, yes they have requirements for local partners but they also have free zones that allow foreign companies to operate without a local partner.

So far the Europeans and the North American carriers have elected to lobby their governments to limit access for almost every airline from MENA. This is a failed policy, they forget that the Gulf carriers are developing markets in South America, Africa, the CIS and Asia locations where their governments have no influence.

The lack of innovative thinking and problem solving is indicative of organisations that have been very comfortable for a long time with the status quo and are at loss when the world changed. As long as these carriers bury their heads in the sand and go screaming to their governments there will be no solution. These Gulf carrier add value to the destinations they serve, they advertise them as holiday destinations something that the European and North American governments on the whole don't do.

So far no one knows exactly what they want other than stop the rapid growth of the Gulf carriers, in their countries, but would the threat go away when these carriers dominate traffic in Africa, South America and shut them out of there. I don't think so

The solution is to stop accusations and counter accusations and sit down and work equitable solutions that are win win.