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)