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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Every single time I’ve been to Dubai, I’ve heard that Emirates is bankrupt and the state of Abu Dhabi has bought the airline. But I always dismissed them as baseless rumors. Then, the Dubai World crises happened around Thanksgiving/Eid. And that made me think again. That the Abu Dhabi government could ask for Emirates, the airline, as collateral in bailing out Dubai, the state.

So, let’s imagine that if this does happen, that Abu Dhabi takes over Emirates and by default it merges with Etihad. What will that mean for the airline brands?

1. Emirates and Etihad merge to form a mega-airline with over 250 planes connecting almost any major city in the world with any other – one-stop.
2. Emirates and Etihad move operations to the Jebel Ali Airport – DWC from their respctive hubs to centralize operations
3. Ultimately, effectively managing the scale of the new airline’s operations can determine its chances of success

However, I feel that this is unlikely to happen, because:

1. Emirates is much larger than Etihad, and much more profitable too (Etihad is yet to turn a profit)
2. Emirates is a much better known brand than Etihad
3. They have very different fleet compositions – Emirates all-widebodies, Etihad a mix
4. Chances of integrating two hubs that close to each other (Dubai-Abu Dhabi is a 2hr drive) is not practical
5. Abu Dhabi Airport has already invested huge amounts in developing the airport as a future hub and Jebel Ali airport is far from being completed – so a hub merger is not on the cards
6. Especially because a Jebel Ali airport which is 1.5 hours from either Dubai or Abu Dhabi, connected by trains, is impractical

Hence, the my conclusion is that no, the crises will not lead to an Emirates and Etihad merger. What may very well happen is this:

1. Etihad takes a large stake in Emirates, just like Lufthansa has a stake in Austrian or Swiss
2. Both brands should be kept intact
3. Etihad and Emirates optimize their route networks such that they complement each other and don’t bleed each other on major route. For example, instead of offering flight from Sydney to London 20 mins apart from each other, they can be more even spread out throughout the day. And I don’t think an Aussie is concerned whether he would transit in Abu Dhabi or Dubai on his way to London
4. Both Emirates and Etihad should optimize capacity on certain routes. For example, an Etihad A320 can be sent to Cochin or Peshawar, instead of an Emirates B777.
5. They save money through join procurement and technology implementation

And I think we’ll have a strong pair of airlines, just like AirFrance-KLM, which have the might to take on any other major carriers.

So, what do you think about the prospects of Emirates after the Dubai crises? Is mine a fair analysis? I’d love to hear your thoughts here and on Twitter.

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Another ranking, another familiar (and not so familiar) story. This time, Travel+Leisure ranking of World’s Best international airlines ranks Singapore Airlines at the top, followed by Emirates – which climbed a notch, and Thai Airways as the third, which climbed two notches. The surprise entries in the top few airlines here are SilkAir – Singapore Airline’s regional wing – and Air Tahiti Nui. It’s surely a proud moment for those at Singapore Airlines and SilkAir to have both the airlines among the world’s best. Air Tahiti Nui is in the Top 10 for the first time, so quite an achievement for them as well.

All rankings like these tend to bring out certain unique nuances about the airline industry. Here are some interesting observations.

1. These rankings are attained by surveying readers of the Travel+Leisure magazine, who’re serious holiday-makers. Hence, the inclusion of “holiday-destination-heavy” airlines like SilkAir and Air Tahiti Nui should be taken with a pinch of salt. Moreover, the fact that other established holiday airlines like Thomas Cook and Condor are not included in this ranking should send some signals back to their headquarters.
   
2. The fact that there is hardly any overlap between these rankings and airlines that won the Freddies – ranking of the best frequent flier programs – reflects that most of the fliers who’ve participated in this survey are not frequent fliers. So does that mean that this ranking should carry less importance than others? Probably not. It just reflects the preferences of a different segment of travelers.
3. An often overlooked factor is the regularity with which some airlines come out tops, regardless of the ranking type and year after year, like Singapore Airlines and Emirates. It says tons about their management not finching in times of crises (like now!) and keeping their promises with their customers.

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The InsideFlyer magazine published an article entitled “The FFPs of the Middle East” last September. Though on the face of it, the article compares the various FFPs among the leading airlines there, upon closer look, you also discover the nuances that enhance brand value for the customers of these airlines. As proven by the large number of airlines from the Middle East winning the Freddies earlier this year, there are surely lessons for grabs here.

Catering services specifically to customers’ needs ensures loyalty

The region is flush with oil revenues, and more rich Arabs are taking to the skies – flying business class and first class. Airlines in the region pamper this key segment of their customers. Etihad Airways just opened a plush business class lounge at Abu Dhabi airport and offers limousine pick-ups, like Emirates. Emirates is also the first airline to introduce showers on-board its new A380 first class cabin. Qatar Airways has gourmet meals catered to suit their frequent flyers. It is no wonder that programs like Emirates Skywards reports that the program’s current rate of growth is just over a member a minute.

More importantly, all of these airlines give a variety of options to their customers to en-cash their frequent flyer points – up to 600 options at Etihad! These include not just flight tickets and partner merchandise, but also specially catered experiences like weekend breaks and shopping to one-of-a-kind experiences such as a night with the paparazzi or tandem skydiving among many others.

In addition to pampering the super rich, the budget airlines in the region offer the millions of low-wage workers from South Asia, China and The Philippines to fly home without burning a hole in their pocket. Again, a number of these airlines are owned by the legacy carriers, and new ones are propping up very often. The latest is FlyDubai, being launched by Emirates.

Airline services and frequent flyer programs that actively cater to customers’ needs can have a huge leverage on airline’s brand loyalty, especially over time, as new competitors take to the skies. And this is demonstrated very well by the Middle East carriers.

Feel free so share this article with your friends. If you enjoyed this article, you can to get free updates by email or RSS.

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