The success behind the continued growth of the Arabian Gulf carriers

By John O'Connell

Airneth Column
September 2009
By Dr. John F. O’Connell

The Middle East is reputed for its petrochemical industry as the region contains 65% of the world’s oil reserves, as well as 40% of natural gas reserves (OPEC 2003). However the spotlight of international attention is now focusing on the rapid rise of the Arabian Gulf carriers as their respective governments have formulated a master plan to prepare for the post-oil era by diversifying the region’s industrial base, of which aviation will become an important contributor. The geocentric location of the Middle East renders it an ideal location to develop a mega hub as it is roughly mid way between Asia and Europe. It is estimated that around 4.5 billion people reside within an eight-hour flight radius of the Middle East, which has the potential to connect the vast majority of the world’s population to anywhere in the world through a single stop. The aviation powerbrokers that are emerging from within the Middle East are the United Arab Emirates and Qatar which have developed a blueprint to expand the fleet of the domiciled airlines, to increase the capacity of the airports, while at the same time develop a tourism infrastructure that will entice transiting passenger’s to spend time at these locations. 

The first part of the grand master plan was to enlarge the fleet size. By mid 2008, Emirates, Etihad and Qatar Airways had placed firm orders for 175 A350s, 63 A380s, 68 777s, 75 787s and 12 A330/340. In fact these three carriers have more widebody aircraft seats on order than the entire 31 members of the Association of European Airlines or from the 17 members that constitute the Association of Asia Pacific Airlines. This capacity that is on order is a ‘game changer’ and rocks the very foundation of airline competition as it presents a major threat to both Asian and European carriers. 

The next part of the masterplan that is being formulated by the Arabian Gulf countries is to develop the region’s airports so that they will be able to accommodate the projected increases in passenger traffic and eliminate bottle necks. Dubai’s airport is currently being expanded so that it will have a capacity to handle up to 70 million passengers per annum, while a new airport is also being built some 40kms away and this is causing much concern among airport managers throughout the world as it is set to change the flow of international traffic – especially between Asia and Europe. Dubai’s new Al Maktoum International airport will become the world’s largest airport as it will be approximately equal to (in terms of passengers) the combined size of Chicago O’Hare and New York JFK, handling 120 million passengers per year and costing around $9 billion to construct. It will also have an annual cargo capacity of 12 million tons, more than three times that of Memphis International Airport - today’s largest cargo hub. In neighboring Qatar, another new airport facility is being built and when it is completed in 2011, it will be approximately 12 times larger than the existing airport of which 60% has been reclaimed from the sea at a cost of $11 billion. It will accommodate over 50 million passengers, roughly equal to Frankfurt’s throughput. It is the world’s first airport designed specifically to accommodate the A380. 

To complete the grand master plan, the Gulf states are creating numerous tourism and entertainment projects with diversifying themes such as sports, shopping, museums, cultural sites, etc to accommodate a wide audience. In Dubai for example, 77 new luxury hotels (mostly 5 star) are being built which will provide an additional 126,150 rooms by 2010 (TRI Hospitality Consulting, 2006). Tourism is beginning to flourish in this part of the world as the World Tourism Organization (2008) stated that the Middle East was the fastest growing tourism region in the world, growing from 25.2 million arrivals in 2000 to 46 million arrivals by 2007.

However, there are three other core attributes that are contributing to the continued success of the Gulf carriers and include: the development of mega-hubs, cultivation of a low cost structure and by establishing strong brands. 
Firstly, the Gulf-based carriers have developed a very effective hub and spoke system as this mechanism allows a number of cities (spokes) to be linked to a central hub, and each additional spoke that is added magnifies the linkage benefits and through services. By combining spoke-to-hub traffic with transfer traffic at a central hub, the Gulf carriers are able to offer a wider variety of destinations to consumers, with high frequencies as consolidated traffic at the hub allows the carrier to operate up to two synchronised banks or waves of flights per day. Emirates for example, connects 22 European gateways with 10 destinations in India giving it a distinct competitive advantage over a European or Indian carrier. Clarke (2007) stated that 50% of Emirates traffic is presently transiting through Dubai, down from 75% a decade earlier as more passengers are terminating at the base airport because of its developing tourism, conference and business industries, while MIDT data indicates that connecting traffic represents 70% and 80% of Etihad’s and Qatar Airways total traffic. 

Secondly, the Arabian carriers have low operating cost structure. The average age of the fleet is generally less than five years, which has an enormous knock-on effect on unit costs. Labour intensive tasks are performed by employees from the cheaper labour markets of the Indian subcontinent. In addition there are no unions and strikes are forbidden - thereby employees are unable to pressurise companies for higher salaries. Airports within the United Arab Emirates and Qatar are compelled to act in the interest of airlines as both activities are overseen by a member of the ruling family and hence landing charges at Dubai, Abu Dhabi and Doha are a fraction of the cost of European airports. 

The final strategy that has enabled the Gulf carriers to become so successful is their devotion to strengthening their brand. Their branding strategy is very different from other carriers as they have invested a large part of their marketing budget into sponsoring sporting events. The UK is Emirates and Etihad’s most important market and consequently they sponsor two of the most influential premier football teams in the English league - Chelsea and Manchester City. These carriers in general sponsor a sporting event that is close to the heart of a nation like cricket in India and rugby in New Zealand, this allows the brand to be incorporated into the very spirit of the sport and spectators perceive it in a very positive manner. Sports sponsorship has become an integral component of the marketing mix of the Gulf based carriers.

There is no doubt that the Arabian Gulf is changing the dynamics of international aviation as Emirates, Qatar Airways and Etihad Airways are quickly emerging as the new global challengers.


OPEC, 2003. The Annual Statistical Bulletin, Organization of Petroleum Exporting Countries, Vienna, Austria.

TRI Hospitality Consulting, 2006. Ready for 30 Million Room Nights?, accessed at

Clark, T., 2007. Charles Lindbergh Lecture entitled '21st Century Civil Aviation – Raising the Game' Royal Aeronautical Society, Hamilton Place, London W1.

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