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ME mega carriers

Oct 17, 2017

Oops, why non-stops to Europe aren’t going to ‘kill’ Middle East hubs

Airbus makes it clear that the Middle East is a huge growth zone not just a place to refuel, or interrupt a flight to Europe

Part of a satellite airport city predicated on growth at adjacent Doha airport in Qatar

One of the more vulnerable predictions about the future of air travel is that non-stop flights between Australia and Europe will see an end to the giant Middle East carriers, currently meaning Emirates, Etihad and Qatar Airways.

However a read of the Global Market Forecast for the Middle East just released by Airbus is a reminder that such a perspective totally misses ‘the plot’.

Whatever Qantas can ultimately do with more capable but as yet unavailable ultra long range jets (following on next year’s interim non-stops  in 787-9s between Perth-London) is clearly important in this market. Yet what is happening in the ME is radically expanding the importance of originating as well as connecting traffic in that part of the world to the Australian economy.

This particular 20 year rolling Airbus forecast, which on past performances, will be very similar to Boeing’s commercial forecasts when it reviews the same region, buries in the fine print some startling estimates of future demand.

It says 30 percent of the people in emerging markets such as India, China and some countries in ASEAN take a least one trip by air on average and by 2036 this will grow to just over 80 percent. 

At present, Airbus says, there are 58 aviation mega-cities across the globe, accounting for more than a million daily long-haul passengers. By 2036, there will be 95 mega-cities, catering to 98 percent of the world’s long-haul services. The five mega cities existing today in the Middle East will more than double to eleven over the next 20 years.

It isn’t really clear if the forecast means four in five people in some rapidly improving economies will fly somewhere in the same year, since this implies the skies over earth will go dark with jets and cause a global ice age, but allowing for something to have gone missing from what is currently on the Airbus web site, there is no doubting the underlying message.

There is going to be a huge amount of new demand for air travel in parts of the world that are taking their place in the sun. The ME might seem like a place to fly over to those who don’t fully grasp what is happening, but in its own right, it will generate more wealth and activity than might seem apparent in these troubled early 21st century times.

In terms of actual airliners, Airbus estimates that between now and the end of 2036 the ME will need 2,590 new aircraft for replacement of 520 older generation aircraft, and 2,070 aircraft for growth, with 730 expected to remain in service over the period.

The current orders from Middle East-based carriers stand at 1,319 aircraft, of which 687 are single-aisle, 409 twin-aisle and 162 very large aircraft.

(This is inconsistent with known orders for Boeing 777Xs if they are categorised as slightly less in stature than VLAs, even though they are the highest capacity twin engined jets yet being developed. Keep in mind, there are A330s and 777s out there today with more seats than might be found in some more luxuriously appointed A380s.)

A problem with Airbus and Boeing forecasts so far out is that they are framed within the constraints of currently built or under development designs. By the end of their forecast periods those constraints will have been replaced or challenged in the market by airliners we can’t even imagine without knowing what happens to fuel, engine and materials technology.

Airbus predicts passenger traffic to from and within the Middle East will grow 5.9 percent annually until 2036, well above the global average of 4.4 percent. That’s ‘to-and-from’, not ‘over.’

Conclusion: The ME is going to be big. Even Bigger than Just Very Big. Flying ‘over’ it is likely to end up being very ‘niche’.

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24 thoughts on “Oops, why non-stops to Europe aren’t going to ‘kill’ Middle East hubs

  1. Jacob HSR

    Hubs will always exist because a city like Canberra is probably not going to be connected to Europe directly. Canberra does not even get daily international flights to anywhere now.

    The cheapest way to go from Auckland to London is via Doha.

    Buying a Qantas ticket to get from Perth to London is not the cheapest but some people are willing to sit down for 17 hours straight.

  2. Tom the first and best

    Non-stop flights are obviously not going to destroy the business model of the intermediate hub carrier (the ME3, Singapore, Cathay Pacific, various Chinese Airlines and others) but they may well represent the best way to compete with them on the bigger very long haul routes they are in the middle of. A combination of the 787 allowing lower volume non-stop very long haul flights, allowing a wider number of routes to be directly served non-stop and the speed and simplicity of avoiding an intermediate stop, favour endpoint airlines flying direct routes, especially for somewhere with a high percentage of very long haul passengers like Australia.

    1. Dan Dair

      TtF&B,
      That was always Boeings ‘justification’ of the B787.!

      However, the problem with that ‘simplistic’ analysis is IMO, that whilst you can imagine any number of people who would want to fly directly out of Canberra, Brisbane, Perth, etc., to any number of worldwide destinations, filling a plane with enough people who all want to go to the Paris region, what if one day 90% of the passengers wanted to go to Nice.? …..& the same scenario for every other ‘direct’ flight out of ‘regional’ Australia.?

      Although a flight might be ‘direct’ from one end, it might well be into a hub at the other, simply to accommodate the varying final destinations of the passengers.?

      Perth to Heathrow is great if you’re going to London.
      But flying with the ME3, will probably be cheaper, healthier & more enjoyable if you’re actually travelling to anywhere else in the UK or Norther Europe.?

      1. Tom the first and best

        Perth to Paris and Frankfurt may well be viable routes in the same vein as the London route. Flights from eastern state capitals to Rome and Athens may be viable as well.

        The alternate strategy for an Australian airline would be a hub in the north-east of Australia, grouping together the Australian demand for most of Africa and Asia and all of Europe, and flying as many routes as profitable from there.

        1. Dan Dair

          TtF&B,
          I respect Qantas attempt to change the dynamic by beginning direct flights to Heathrow.
          I’m not sure though that it’s being marketed properly.? Time will tell.?

          I think that there is also a third-way in which QF could direct their energies.?
          It’s been talked-about on these pages before, but the idea of an Indian (or possibly Sri-Lankan.?) hub could offer Qantas an in-house engineering base which would have lower-costs than on-shore but better control & oversight that contracting-out that work.?
          Utilising a hub which was well-on-the-way to Europe would mean little or no backtracking across Australia for passengers,
          And,
          would enable QF to do all the things you suggest in your posting, whilst also allowing them to utilise the ‘hub’ aspect to fly more-nearly full aircraft in all directions.?
          (& of course, an heavy-engineering base at a ‘mid-point’ hub, would also mean that QFi wouldn’t have to have any ‘deadhead’ flights to anywhere, as they’d be passing through the hub/base anyway.?)

          1. Jacob HSR

            Dan Dair,

            I do expect a hub to emerge in South Asia. Especially for bargain hunters or even people wanting well-balanced legs. Flying via ME3 means a 14 hour leg.

            So rather than the end of hubs, we will have 2 more hubs.

          2. Tom the first and best

            An overseas hub is unlikely. It would likely be very complicated to organise all the relevant permissions for the flights with the hub nation and the destination nations. India and Sri Lanka both have their own airlines and I am sure their governments would prefer if airlines from their countries, employing their people, to an Australian airline.

            It is likely that the furthest hub that is jurisdictionally practical, for an Australian airline, is the Cocos (Keeling) Islands and they may not be a practical hub location because the are remote, have a very small population and may have environmental issues with building and staffing an airport big enough. There may be similar issues with Christmas Island (although it has nearly 4 times the population).

  3. BARLEY

    nonstop PER/LHR will effect demand for 1 stops PER/LHR via anywhere, but the QF nonstop will be at a premium.
    For everywhere else in Australia, it will still be one stop to LHR & many better airlines than QF, are also almost always cheaper.

    I’d fly SQ long before I’d resort to lowly QF, even if SQ was more expensive.
    Nothing at all special about QF.

    1. Tom the first and best

      No other WA airport has flights to Europe. Neither do Alice Springs or Canberra, both of which have Perth direct flights. I believe Qantas`s plan is to have Adelaide-London passengers use the Perth Flight as well. If there was a Perth-Hobart flight, Hobart passengers might be inclined to use the Perth service as well. The Perth-Hobart flight will also originate in Melbourne, minimising stopover time in Perth for Melbourne passengers.

      There are also smaller destinations served from Heathrow not served by the intermediate hub carriers, such as the smaller British Isles destinations, for which the Perth-London flight will be competitive.

      The two factors combined mean that the Perth-London non-stop flights will be competitive on some trips of three legs, where all other competition is on at least 4 legs.

  4. endeavour.paul@gmail.com

    What ever happened with the EU’s carbon tax?
    It was going to tax fuel taken on in the EU and was going to give a significant advantage to the ME3 as well as Turkish Airlines and anyone else that wanted to hub just outside the EU. It would be a massive cost impost on Qantas loading up with fuel for the long haul to Perth.
    I recall China was protesting then it all went quiet. Did it come in or die off?

    1. Tom the first and best

      Application of an EU ETS to flight legs landing or taking off in EU would actually encourage long haul flights from Australia to stop over in states surrounding the EU and then make short hops into the EU.

    2. Jacob HSR

      Endeavour.Paul@Gmail.Com,

      The proposed air miles tax (that took no account of how efficient the aircraft is) was not implemented I think.

      What they should do is make high speed train tickets free during the off-peak. That would A) encourage people to travel during the off-peak instead of the peak and B) get people out of polluting aircraft and into electric trains.

      Mr Jordan Cox flew from Sheffield to Berlin to Stansted instead of taking a train from Sheffield to London because it was cheaper! youtube. com/watch?v=VHM94Wg92T0

      time. com/money/4198067/save-money-flights-europe-train-jordan-cox/

      1. Tom the first and best

        The travel demand in Europe is such that there is no time during the day with low enough travel to have free high speed train without massive overcrowding.

        Making high speed rail free would not be economical as off-peak travel is significant part of what pays for the system.

        The times of lower demand on high speed rail and airlines are often at the same time, so airline profitability would be reduced. And government`shave far higher spending priorities.

        There is however now a low cost airline style high speed train operator in France called Ouigo (SNCF`s Jetstar) with low cost internet purchase only tickets.

  5. Giant Bird

    I wonder if the boat of increasing demand to ultra long haul non-stop has been largely missed for economy class. I suspect that the main demand for these ultra long haul will be a niche of a few routes with mainly business class and first class configuration. My thinking is around the fact that the baby boomers who are a large part of the economy market have started moving into their 70’s. When this segment was in employment they were looking for the fastest overall transit time and overnight flights to make the most of limited vacation days. As they move into their 70’s vacation days are unlimited but long haul travel is more weary. They have been to London and Paris more than once. Their destination is somewhere in the country side of France, Italy, Germany etc. Total flying time of all legs of the trip from an Australian capital to their destination is going to be 26+ hours. They do not want 14-17 hour legs, and they do not want to spend the premium on business class, they have the time to do daytime legs of 6-10 hours with overnight transit to have a meal in a restaurant and a sleep in a bed. I think this is what they will pay a premium for not the the Qantas ULH idea. Sometimes when I am using on-line airfare search engines and find a good fare and then try to put a stopover into the itinerary the price doubles, other times it makes no difference. But it can be hard work to optimise the stopovers. I think there is money to be made by these search engines in helping people find deals of daytime flight legs and overnight hotel transit. I suspect that this is the product that the biggest growing market segment is after. The active retirees.

    1. Dan Dair

      Giant Bird,
      With respect, I think the ‘active retiree’ market is very well served by the existing circumstances.?

      I agree though, that selling non-stop to Europe ought to be a business-premium product.?
      I’m certain that paying extra for a proper seat, with proper legroom and a shorter flight time, is what will keep passengers returning to this service.?
      (a bit like the BA Concorde service, which was scarily expensive, but a comparatively very short flight & with unbelievable levels of in-flight service.?)

      I genuinely believe that economy passengers will seriously consider rearranging their return leg via Dubai or Singapore after their first 17-hour experience of a SardineLiner.?

      1. Giant Bird

        Dan Dair, that is exactly my point. The flights that the “active retirees” want are already there. The business opportunity is in the searching and packaging of day time flights with stopover accommodation.

    2. Tom the first and best

      There are still many, many thousands of Australians who are working and/or who have school age children travel between Australia and northern/western Europe each year and shorter flight time will still be a consideration for them. The old workers are replaced by the young and the cycle of life continues.

      There is also premium economy on this flight.

      1. michael r james

        I suppose the airline and travel geniuses have done their research but I am quite unconvinced by any of these special pleading arguments. The actual elapsed-time saved will be merely a few hours (and if you are first flying to Perth from somewhere else, even less) and then in “effective” time, probably a loss: when you arrive seriously tired and disoriented in Europe for that business meeting or whatever (we’re agreed only bizoids will be doing this–because someone else is paying and/or is obsessed with managerialism, ie. entirely notional concepts of “time efficiency” of their staff). The non-stop ultra-long-haul is a desperate ploy to avoid ceding all the traffic to the ME and Singapore etc. I can’t see it working, as it is too small a niche customer base which IMO would be a once-only customer who would revert to the regular routes.

        1. Tom the first and best

          I think you are under estimating the hardiness of younger Australian travellers heading to/from Europe. The get all the flying done in as little time as possible brigade.

        2. Jacob HSR

          Michael R James, a startup called Boom has orders from several airlines to produce 50-seat supersonic aircraft:

          R43gKMWAPco

          Each ticket is said to be U$3500 one way from SYD to LAX but the journey will only be 6 hours 45 mins. While today’s subsonic business class ticket costs U$4800 for a 14 hour journey. I think a lot of businessmen would choose Boom to get there quicker and it is not as if the seats in Boom would be uncomfortable.

          1. michael r james

            Jacob, since when were we talking of supersonic flight? The biggest objection is that it takes 17 hours and uses exorbitant (and unnecessary) amount of fossil fuel. However if/whenever it arrives the fare will not be as little as $3500.
            Don’t know if the name is a great choice! Are you sure they aren’t shooting you out of a cannon? Which would be fitting since I think at this stage it is a circus trick.

        3. Jacob HSR

          Michael R James, if we want less jet fuel to be burn, we should ban hidden city pricing.

          Say you want to go from MEL to AUH. If you fly express, it will cost you A$1825 return. But if you fly MEL to AUH to LHR, the ticket is A$1236 return!

          $589 cheaper if you fly further via the same airport, the same airline, the exact same aircraft and cabin crew!

          A cheaper option is to go MEL to KUL to MCT to AUH for $1491 return. But that would mean much more jet fuel burn than going MEL to AUH express, yeah?

          The EU needs to step in and ban hidden city pricing. (LHR is still in the EU).

          ——

          Boom is indeed a terrible name. They should have called it ProSonic. But my point is that airlines get a great chunk of profits from business class seats. Heck, each seat in the very long SIN to New York flight was a 180° bed!

          Supersonic civilian flights are not a circus act – the Concorde flew regularly. But it was too fuel inefficient to fly from Japan to USA. Boom hopes to be 30% more fuel efficient than Concorde. They will fly a 1/3 scale model in 2018. Watch the video.

          1. michael r james

            The French did fly Concorde from Paris to Rio de Janeiro, at least for a while, which is slightly longer than Tokyo to Los Angeles. One might have thought it was a rare potential market, what with enough over-paid executives and rich-listers etc. in both catchments. I guess the main reason the Tokyo flight never was tested was that the Japanese companies wouldn’t buy the plane and/or they weren’t available to buy. If I remember BA and Air France didn’t really pay anything for their planes. The governments, especially the tight-fisted Brits, weren’t willing to fund the construction of any more. One does wonder if they shouldn’t have gone the American route (think big, roll the dice like Elon Musk), since the development was a sunk cost, and made a hundred of them to lease to a bunch of world airlines. It certainly had plenty of caché when the masters of the universe boasted of using it.

            Remember the neat piece of advertising placement (one guesses) by Air France in the ’95 remake of Sabrina. The Harrison Ford billionaire character had broken Sabrina’s heart by giving her a one-way ticket to Paris and–at the last minute–not going with her as he promised. But then realising he was stricken with true-love, he caught the Concorde and arrived in Paris before her! They showed both planes taking off from JFK, a 747 and Concorde, both in AF livery.

          2. michael r james

            Doh! Re my last post, obviously Qantas should make a promo-vid of a version of Sabrina in which she takes the slow old route and he takes the shiny new 787-9 from Perth and beats her to London!
            Or, given Alan Joyce, they could make it really modern and turn it into a SS romance in a latter-day kangaroo route story!