When a video of a passenger being dragged off a United Airlines flight went viral last month, the American carrier’s Middle Eastern rivals were quick to mock its customer service. Qatar Airways updated its smartphone app to say that it “doesn’t support drag and drop.”
The ribbing was justified. During a decade of expansion, Qatar Airways, along with Emirates of Dubai—the world’s largest airline by international passenger miles traveled—and Etihad Airways of Abu Dhabi, have wowed customers with superior service and better-value fares.
Passengers have joined them in droves, abandoning hub airports in America and Europe as well as the airlines that use them. During the past decade the big three Gulf carriers and Turkish Airlines tripled their passenger numbers, to 155 million in 2015. They went a long way toward dominating long-haul routes between Europe and Asia. Most international airlines rely on travelers going from or to their home countries, but customers of the four “super-connectors,” as they are known, mostly change planes at the carriers’ hub airports en route to somewhere else.
A slowing of this spectacular growth at some point was inevitable, but it has been exacerbated by several things.
First, the super-connectors have been deeply affected by the halving of oil prices since 2014, which has reduced their customers’ spending power and sharply cut demand for air travel from the Middle East itself. In particular, energy companies, responsible for 29% of GDP in the Gulf states, are slashing travel in business class, the most profitable cabin in any airline’s fleet.
Second, geography has turned sharply against them. When Sir Tim Clark, president of Emirates, helped Dubai’s government to set up the airline in 1985, he was quick to spot that a third of the world’s population lives within four hours’ flight of Dubai, and two-thirds within eight.
“They were in the right place at the right time,” said Andrew Charlton of Aviation Advocacy, a consultancy. “But now they’ve been caught in the wrong place at the wrong time.”
A series of terror attacks in the region and an attempted coup in Turkey last July has prompted many passengers to shun airports in the Middle East and to go elsewhere to change planes. The latest figure for capacity utilization for Middle Eastern airlines, dating from March, was only 73%, the lowest since 2006 and worse than at the height of the financial crisis in 2008-2009.
The latest blow has been a set of travel restrictions introduced by the Trump administration. Since January Trump has made efforts to ban the citizens of several Middle Eastern countries from entering America. Despite various legal challenges, those efforts have hit inbound traffic. In March America also banned electronic devices larger than a smartphone, chiefly laptops, from the cabins of planes flying between eight Middle Eastern countries and its own airports, and Britain also introduced similar restrictions. The issuance of entry visas to America has been cut and security vetting has been increased.
After the first travel ban, demand on Emirates’ American routes fell by 35%. The banning of laptops has had an even worse effect on the Gulf carriers. Many passengers, particularly accountants, consultants and lawyers who are paid by the hour, now are choosing to fly via European hubs on other airlines, said Greeley Koch of the Association of Corporate Travel Executives, a trade group.
The airlines have started lending their own devices to business-class passengers, but demand is still tumbling. In April Emirates cut flights to America by a fifth, a severe reversal after three years of rapid expansion there. For a network airline a drop in demand from one destination means drops on all the routes that connect with them.
Airline passengers are starting to realize that recent terror attacks are not actually occurring aboard planes, said Mehmet Nane, CEO of Pegasus, a Turkish low-cost carrier, and many are returning to Middle Eastern airlines.
© 2017 Economist Newspaper Ltd., London (May 13). All rights reserved. Reprinted with permission.
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