The future of Middle East Super-Airlines: Emirates and Etihad to merge, and Qatar to join an alliance

There has been a lot of educated commentary about Emirates’ latest A380 order taking the fleet size for that specific aircraft to a total of 90. Though that’s impressive, it’s worth thinking about how dramatically it would change Emirates’ competitors’ business plans.

While we can expect the likes of Air Canada and Lufthansa to seek more protection from their respective governments, the order is likely to dramatically change the airline environment in the Middle East itself. Specifically, Etihad Airways and Qatar Airways – both of which have been closely following the Emirates model – that of connecting any two cities in the world in one stop – will be forced to think about how to compete with a bigger, much bigger, Emirates. Here’s what I foresee happening within a couple of years.

Etihad Airways – if you can’t beat them, join them

I’ve dismissed an immediate merger of Emirates and Etihad previously on this blog, though it cannot be ruled out in the medium term.

James Hogan, Etihad Airways’ CEO has promised the Abu Dhabi government that the airline will be profitable by 2011. Given that Etihad lost $1.2 billion last year, it looks difficult to achieve, with all the competition the airline faces. If he doesn’t keep his word, then his Arab employers may be forced to seek a replacement. And this new CEO would have a tough job at hand – either beat Emirates, or join forces with them.

In the long term, it actually makes sense to combine two mega-hubs that are a couple of hours drive away and leverage upon each other’s strengths, rather than scavenge for passengers. Moreover, the Dubai World Center (DWC) airport that opens this month is perfectly located halfway between the two emirates of Abu Dhabi and Dubai. Most importantly, it will be better for the country of UAE as a whole, to have one strong airline, than one very strong and one potentially weak airline. Just like an AirFrance-KLM is better for France and Holland.

Ultimately though, the final call will be that of the rulers’ of the two neighboring states, and they might surprise us all.

Qatar Airways – can’t join them? Join others

What happens to Qatar Airways’ business plan even if Etihad doesn’t merge with Emirates? They certainly can’t just keep on expanding at the rate Etihad is expanding, or grow to the size of Emirates. What’s the next best option – join an alliance.

Though the three super-connectors have resisted alliance talk till recently, it will be in Qatar Airways’ benefit to join one of the three global alliances. The CEO has already expressed that he’s not averse to being approached by Star Alliance. Moreover, they already have code shares with United, US Aiwarys and ANA. Joining an alliance would help counter the massive scale of Emirates, at least for some time.

Something else that would help Qatar Airways is if they clearly differentiate their business strategy from Etihad and Emirates. They’re already showing signs of this by expressing interest in buying Bombardier’s CSeries aircraft (watch video tour), which would offer them a very efficient short-haul capabilities.

There are lots more ways the competitive environment would change in the Middle East thanks to Emirates, and this is how I see them affecting their closest competitors – Etihad and Qatar. What do you think? Let’s discuss in the comments or over on Twitter (@simpliflying)

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Shashank Nigam

Shashank Nigam

Shashank Nigam is the CEO of SimpliFlying and a globally sought-after consultant, speaker and thought-leader on airline branding and customer engagement strategy. He is also the youngest winner of the Global Brand Leadership Award and has addressed senior aviation executives globally, from Chile to Canada and from Sydney to San Francisco.Shashank's perspectives have found their way into major media outlets, including CNN Travel, CNBC, MSNBC, Bloomberg UTV, Mashable and in leading publications like Airline Business, ATW, Aviation Week, and others.Shashank studied Information Systems Management and Business Management at Singapore Management University and Carnegie Mellon University. Hailing from India, he splits his time between Singapore and Vancouver, among other cities.
Shashank Nigam
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Showing 3 comments
  • Oussama
    Reply

    There are political realities on the ground that will transcend commercial consideration. The three airlines are considered a vital element in the development of their respective economies. Further, Abu Dhabi and Qatar are rich and can afford to sustain a certain amount of losses.
    All three airlines depend largely on moving people from one end of the globe to the other using their far reaching network. In a sense their dependence on their home market is limited, in that regard Qatar Airways is the most vulnerable due to its smaller population 1.5 millions compared to 7 millions in the UAE.

    Have a read at my blog Emirates at 90 A380s http://oussamastake.blogspot.com/2010/06/emirat

  • Yogesh Pagar
    Reply

    I agree with Oussama.
    Also, Shaikh Nahyan will never want to lose Etihad identity in any possibilities of a merger etc. Already I could sense a proud feeling all over AbuDhabi after they bailed out Dubai off many of their crisis' & will have to support in future turbulent times ahead for Shaikh Makhtoum (which can not be ruled out yet).

    Qatar has a different issue altogether. To carve their identity onto global map, King Al Thani is all out to pump in any amount in Qatar Airways. For Qatar Airways, it is not really an identity issue but standing straight side by side Emirates or Etihad and for that management is focussed in infusing new initiatives by pumping in millions of Dollars every fiscal year.

    Emirates Airline is stuck between old business practices & new age mantra in adapted by its management.

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