Airline Weekly - April 18, 2016
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Airline Weekly - April 18, 2016

Rockin’ in the KSA: The UAE and Qatar aren’t the only hyper-growth airline markets on the Arabian Peninsula

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Cover Story

Rockin’ in the KSA: The UAE and Qatar aren’t the only hyper-growth airline markets on the Arabian Peninsula

Let’s play word association. What’s the first thing that comes to mind about Dubai’s economy? You might say Emirates, the city-state’s globally famous airline. Qatar and Abu Dhabi too have airlines that everyone recognizes.

Now what’s the first word that comes to mind about the economy of the neighboring Kingdom of Saudi Arabia, or “the KSA,” as it’s known within the region? Oil, of course—Saudi Arabia is, after all, the world’s No. 1 oil exporter. As for its national airline, Saudia isn’t much of a player on the world stage, doesn’t make giant headline-grabbing airplane orders, isn’t the target of protectionist campaigns abroad and doesn’t dazzle premium travelers with first-class apartments and showers. It doesn’t run commercials featuring Jennifer Anniston either.

But don’t ignore Saudi Arabia’s airline market. Growth there in the past 10 years has been every bit as staggering as that of markets elsewhere on the Arabian Peninsula, even if far less heralded. In 2015, the country’s airports handled 82m passengers, more than even Dubai’s main airport, which handled 78m. Granted, that’s just one airport, whereas Saudi Arabia has many airports. But the comparison helps underscore just how large the Saudi airline market has become.

The 82m passengers represent a y/y growth rate of 10%, and a growth rate versus 2011 of about 50%. With a population of nearly 30m people, spread across a rather large land area, it’s only fitting that Saudi Arabia’s domestic market is sizeable. But this is not just a domestic story. International air travel has grown at an even faster pace—faster in some respects than in Dubai. According to an Airline Weekly analysis of Diio Mi schedule data, the number of international seats flying from Saudi airports has spiked 87% since the start of the decade, compared to a 68% rise from Dubai. Ten years ago, Saudi Arabia had fewer than half as many international flights as Dubai. Today, it has about two-thirds as many. Even this year, despite the oil bust, international seat capacity from the kingdom is up 12%.

For a country without much international tourism, without a global airline champion and without a major international airport hub, such voracious growth might sound puzzling. The long oil boom that ran from the early 2000s until 2014 (with a brief pause during the 2009 global financial crisis) was naturally one big driver. As gigantic sums of money flowed into the kingdom, a lot more money was available for Saudis to travel abroad. At the same time, higher levels of oil production required more foreign workers, leading to a boom in the migrant worker market, especially from the Indian subcontinent, the ASEAN region and other countries in the... (467 of 1,866 words)

Also Inside this Issue:

This is getting dull. Quarter after quarter, U.S. airlines again and again report record-shattering financial results, never mind the season. Last week was Delta’s turn to shine. It showed off stratospheric margins that not even unit revenue declines and higher labor costs could forestall. A chief architect of the industry’s flight from rags to riches, Delta continues to dominate and innovate, commanding greater control of the Atlanta market than ever and advancing what are often iconoclastic tactics like equity-based overseas ventures and buying an oil refinery. It now appears poised to buck yet another trend by betting big on Bombardier’s CSeries.  

The Lufthansa Group has some CSeries jets on order. What it doesn’t have, more importantly, are the pilot concessions it needs. Ditto for Air France. Well, both airlines last week presented updated offers to their unions. Now it’s wait and see.

In the meantime, Lufthansa seems set to take full control of Brussels Airlines and reportedly wants deeper links with SAS—The German airline clearly sees consolidation as a key path to prosperity.  

Prosperity is nothing Ryanair needs to worry about. It’s known nothing but success for all its life. But that doesn’t mean it’s averse to change, as is clear from its latest package of initiatives. It will even experiment with selling connecting itineraries.

Norwegian is already connecting Europe with the U.S. But it got tentative DOT approval to proceed with an even more aggressive expansion plan, to the great chagrin of U.S. airlines and their unions. Norwegian will join most U.S. airlines in reporting their Q1 results this week.

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