Reading through the global news headlines I couldn’t help noticing that, for the last few weeks, most of the world’s attention has centred on Washington’s relationship with two of its longtime foes – North Korea and Iran. The former intent on threatening its way out of its current economic and diplomatic chokehold, the latter trying to keep a hold of a valuable international deal that has reaped great rewards for local industry – aviation in particular.

But there is one more pariah state that has quietly been re-engaging with the United States over these past few months and is now starting to see the benefits that cooperation with Washington, rather than endless belligerence, can bring.

Sudan. Read more

The year 2015 in a nutshell – Get the report here!


Read more about the 2015 developments in the Aviation Market

In this report, aviation consultancy PROLOGIS presents the year 2015 in figures.

This is a market monitor, based on data prepared by airline intelligence provider ch-aviation, that summarizes capacity, frequency and fleet developments of the last year.

The paper contains a year-on-year analysis, comparing weekly seat capacities and frequencies for the week of Monday, October 20, 2014 with the week of Monday, October 19, 2015. Data of a total of 736 airlines worldwide was taken into consideration. In addition, fleet data of nearly 1,300 passenger and cargo airlines was analyzed with regard to fleet size and age, contrasting November 3, 2015, against November 1, 2014. Figures of 2015 deliveries by aircraft manufacturers were also taken into consideration.

Get the report here!

An in-depth analysis of the European regional airline market and its development within the last five years, 33% of all regional carriers in Europe went out of business between 2008 and today, nearly one fourth of the employees lost their jobs. …


Authors: Hanna Schaal (PROLOGIS) and Max Oldorf (ch-aviation)


Are European Regionals’ Successful Days Numbered?

To download the following analysis as a PDF file click here.


33.33% of all regional carriers in Europe went out of business between 2008 and today, nearly one fourth of the employees lost their jobs. PROLOGIS and ch-aviation have scrutinized Europe’s regional airline market.

Doesn’t it sometimes feel like Europe’s regional airlines’ market exits are as common as their entries? Don’t you occasionally wonder if this industry still bears any potential? In order to gain clarity in this matter, PROLOGIS and ch-aviation conducted a study of the European regional market, comparing data from 2008 with data from 2013.

The results are quite frightening: 44 new airlines were founded from 2008 on, 22 of them have already vanished. The overall mortality rate was 33.33%.

But the most concerning number is probably a job loss rate of 23 % between 2008 and today, which means that almost every fourth employee lost his job.

It seems like regional carriers’ successful days are history.

The Affiliates – Dwindling Partnerships

It all started in the early days with the traditional regional carrier model, which is still very popular today. Affiliated airlines supply or ‘feed’ large network carriers’ hubs with passengers from small, nearby regional airports. In many cases, the relationship between network airlines and the subcontractors is based on a parent-subsidiary model, with the affiliates operating either under their own brands or a regional brand. Lufthansa, for example, currently has four regional partners (Air Dolomiti, CityLine, Eurowings and Augsburg Airways), all 100% subsidiaries with the exception of Augsburg Airways that together form Lufthansa Regional. Nevertheless, the Augsburg Airways regional partnership will be terminated at the end of Lufthansa’s summer schedule 2013 after 16 years due to the German legacy carrier’s restructuring program ‘Score’.[1] Along with the previous termination of the equally longstanding partnership with Contact Air in October 2012, the German airline will have parted from two regional partners within only a year.

A similar decrease in regional affiliated partnerships can be observed at Air France-KLM and IAG (International Airlines Group, holding company of British Airways & Iberia). To cut costs, Air France will be merging the three regionals Airlinair, Brit Air and Régional under a single new brand called ‘Hop!’ as of March 31, 2013, that will operate most non-hub routes with a low-cost carrier like product offering.[2] British Airways already sold its regional BA Connect to British regional Flybe. in March 2007, as the management did “not see any prospect of profitability in its current form”[3] anymore.

All three major European carrier groups not only face increasing pressure from still fast growing low-cost carriers for traffic within Europe. They also feel competition from expanding international carriers, increasingly serving smaller European markets, from hubs in the Middle East for example. These factors have led to lower yields for point-to-point regional traffic and lower demand for hub and spoke traffic within Europe as well as for intercontinental flights. This makes it difficult to continue profitable regional operations with small aircraft.

The Independents – Decreasing Profits?

Flybe. – the keyword that reminds us that when we talk about regional carriers, we are not only referring to affiliates. Since the mid-1990s, there have been a growing number of totally independent carriers that offer point-to-point service to both small regional and large international airports, operating under their own brands and with no ties to large network carriers. Since the acquisition of BA Connect in 2007 we just mentioned, Flybe. is Europe’s largest regional carrier in general. For the six months until 30 September 2012, however, the group that includes Flybe. Nordic (a joint venture with Finnair) reported a pre-tax loss of £1.3m (€1.5m). Flybe. blamed the results on fuel prices at record highs and a decrease in passenger numbers in the UK domestic aviation market.[4] The Norwegian regional Widerøe, that is still fully owned by SAS (with a sale expected this year [5]), but operating fairly independently, was selected European Airline of the Year 2012 by the ERA (European Regional Airline Association). Yet, the award cannot hide the fact that the carrier’s operating profit decreased by 59.8% between December 2011 and October 2012. Other European independents must deal with financial results similar to Flybe.’s and Widerøe’s.

Regionals in Europe: Overall Analysis Results

How did we obtain our results and what do they look like in greater detail? In order to analyze Europe’s regional carrier market and its development within the last five years, we compared airline and fleet data from January 1, 2008, with current data (date of data analysis: February 17, 2013). Regionally, the scope of the study includes all EU member states plus Albania, Bosnia-Herzegovina, Croatia, the Faroe Islands, Iceland, Kosovo, Macedonia, Montenegro, Norway, Serbia and Switzerland. The underlying data for the study is based on a combination of the ch-aviation airline knowledge base, jp airline-fleets and manual research by ch-aviation.

During the time period we observed a total of 195 regional airlines have operated in the countries under consideration, of which only 130 carriers are still active today. This means a loss of 65 regional airlines over the last five years, reflecting a significant mortality rate of 33.33%.

This rate is even more alarming when we only look at the carriers entering the market between 2008 and today: Every second newly founded carrier was unable to survive. The numbers look a bit better for the airlines that already existed before 2008. Of all 151 regionals that existed before 2008, 108 (71.52%) are still operating. They represent more than three quarters (83.08%) of today’s active carriers.
To sum things up, there has been a major airline decline over the last few years. The regional market in Europe in particular does not seem promising to start-ups. Moreover, it should be mentioned that the decline of regional airlines has a negative effect on secondary airports, frequently the bases of regionals. The cessation of a carrier can result in a drastic reduction in airport business volume, making its future uncertain.

Affiliates versus Independents: Converging Ratio

The distinct analysis of affiliated/network airlines and independent carriers revealed a current 1:2 ratio (42 affiliates/network carriers with regional operations = 32.31%, 88 independents = 67.69%; see Figure 3). This ratio has converged. In total, between 2008 and 2013, there were 49 affiliates/network carriers with regional operations (= 25.13%) and 146 independents (= 74.87%) amounting to a ratio of 1:3.

With regard to affiliates and network carriers with their own regional operations, alterations have been comparably low over the last five years. Only two new airlines were founded between then and now that fall in this category, Cimber which launched in 2012 and Olympic Air in 2008. Both weren’t new market participants in the proper sense, but rather successors: Cimber evolved from the insolvent Cimber Sterling (and works closely with SAS) and Olympic Air from Olympic Airlines.

14.29% of the affiliates withdrew from the market. In contrast, 39.73% of the independents have gone out of business. Considering only independents, the highest mortality rate could be observed between the years: A total of 42 carriers were founded from 2008 on, yet 55% of them have failed.

Fleet Development

How have fleets changed over the past five years? In 2008, 706 aircraft with 20-50 seats were operated by European regionals. Within five years, this number decreased by 53.26% to 330. There was also a decrease in the number of aircraft with less than 19 seats (by 13.79%). Only the amount of 50-100 seaters increased by 3.37% from 682 to 705 (see Figure 5). In summary, we can observe a trend away from aircraft with fewer than 50 seats towards aircraft with 50-100 seats.

It is expected that the demise of 37-50 seat regional jets in Europe will come sooner rather than later. This corresponds with a similar development in the United States where major carriers are currently slashing regional jets in this category from their contracts with regional partners very proactively, moving to higher capacity regional aircraft. Lufthansa’s regional affiliates have retired 60 50-seat aircraft in five years, as Lufthansa has decided to drop all of these aircraft and now to also drop all 70 seat turboprops by the end of 2013.

And yet, it was small regional jets like Bombardier’s CRJ-200 or Embraer’s ERJ-145 that replaced turboprops in the mid-nineties. They made flying both short and long routes with just a few passengers more economical and were considered more attractive for passengers, thereby constituting stepping stones into profitability for many regional airlines. However, triggered by the post-9/11 recession, the below 50 seat jets’ success started going south. Regional airlines that also often face competition from low-cost carriers launching the same or similar routes with a completely different business model began moving towards larger regional jets and back to turboprops (as new aircraft types with lower per seat costs have become available).

At some point, the costs of operating 50 seat jets could not be justified any longer after the fuel prices exploded coupled with the global financial crisis.[6] In order to distribute fix costs over a higher amount of seats, the majority of the carriers now focus on operating large 90-plus seat jets like the ERJ195 or CRJ-900 or slightly smaller turboprops like the ATR72-600 or Bombardier Dash 8-Q400 where routes justify the use of these aircraft. Other routes are either dropped altogether or picked up by other carriers operating smaller turboprop aircraft (that will face a problem of their own due to the lack of fleet replacement options) as no new turboprops with 20-50 seats are being offered anymore with the ATR42-600 being the only 50 seat turboprop still for sale.

Green cells = More than 20 deliveries/year of a series (e.g. Fokker70/100, EMB-190/EMB-195) Data source: ch-aviation

The victims: Employees

The preceding analysis results clearly illustrate the regional markets’ downturn in Europe. And, as usual, the recession’s pain is felt most by the employees.

In total, 12,184 regional airline jobs were lost in the European regions we evaluated. Based on a sample of 20 affiliated regional carriers and 20 independents, regionals in Europe currently employ a total of 36 direct and indirect employees per aircraft on average. In total, 12,184 regional airline jobs were lost in the European regions we evaluated. From a rational perspective, this means that over the last five years seven jobs were lost every day. This number probably reflects the dramatic drop in Europe’s regional aviation industry better than any previous figures referred to in this article.

When analyzing the development of jobs in Europe’s regional airline industry, we made a distinction between direct and indirect airline jobs. Direct jobs refer only to the aircrew needed to operate the aircraft, that is pilots and flight attendants. Indirect jobs include all other jobs in operations, administration and engineering. Based on PROLOGIS and ch-aviation estimates, there were 15,118 direct regional airline jobs within the EU and the other European countries we analyzed in 2008. By the beginning of 2013, this number had dropped to 11,930 (a decrease of 21%). During the same five year period, indirect jobs were reduced by 8,996 from 38,486 to 29,490, accounting for a decrease of 23%.

Conclusion and Outlook

Establishing a new airline, no matter whether it is a regional, low cost or network carrier, is a huge challenge and anything but a guarantee of financial success. However, we are still observing all of these new airline start-ups every year. This raises the question: Are the founders and investors in all of these new regional market participants aware of the high risks and low chances of success? Have they recognized the consequences that come along with a failing attempt? And, if so, what is their motivation to still keep trying to enter regional markets with new ventures? After scrutinizing Europe’s regional carriers’ development over the past five years, we believe that this industry is indeed quite challenging at its current stage. Nevertheless, there still seems to be room for growth in some regional niche markets.

When carriers are located at or fly to regions where alternatives are limited or nonexistent, there still is potential. Carriers like Direktflyg, Malmö Aviation, Nextjet and virtual operator Sverigeflyg mainly focus on the Swedish and Scandinavian regional market respectively. Widerøe primarily flies within Norway. Air Iceland offers domestic flights and routes to Greenland and the Faroe Islands. These are a few independent carrier examples with low competition from other carriers or modes of transportation which seem to work on their own or thanks to public service obligation schemes with government support in place to serve remote regions effectively. But most regions in Europe do not offer such niche conditions. And if not sheltered from competition for whatever reason (geographically, airport constraints etc.), regionals quite often have trouble keeping up with low-cost carriers from a competitive perspective, and, from a technological and organizational perspective to effectively work closely, with large international network airlines (i.e. interlining, codesharing, through check-in). So, as network carriers drop regional routes, the point to point demand on these routes is often insufficient for an existing or new regional carrier without network connectivity to take them over. Thus, it is often unlikely that these routes will be served again.

In conclusion, the current situation within Europe’s regional airline markets is no bed of roses unless independent carriers can make use of one of the few prosperous niches to settle, thrive and prosper in.

To download the following analysis as a PDF file click here.


About Prologis and ch-aviation

ch-aviation is managed by a team of passionate aviation professionals from Switzerland, Germany and Austria. Since 1998 offers a wide range of tools and search options targeted at aviation industry professionals to get access to:

the most extensive and up to date airline knowledge base in the world. It provides comprehensive weekly news updates covering global airline industry developments with a focus on:

– strategic network and fleet developments,

– airline start-ups and bankruptcies as well as mergers, acquisitions and strategic partnerships.

– Weekly Airline Route Network Update systematically track network changes of over 700 airlines worldwide.

ch-aviation also tracks more than 37.500 individual aircraft, in excess of 5.500 airports and airlines with access to worldwide airline schedules and route networks.

PROLOGIS ranks as one of the world’s leading management consultancies that specialize in the aviation industry thanks to its more than 15 years of experience and over 45 airline customers served.

With an average of 7 years of practical experience working for airlines, airports and ground handling companies, the PROLOGIS consultants are recognized experts on the following topics:

–          Distribution & Revenue Management

–          Ground Operations & Airport Processes

–          Revenue Accounting

–          Network Planning & Scheduling

–          IT Services (System Migration, Evaluation and Implementation)

–          Financial Controlling and Data Warehousing

Thanks to the many international projects on behalf of network, regional, low-cost and charter airlines from more than 30 different countries, PROLOGIS offers best practices and integrate these into their customers’ existing structures and cultures. Whether it’s strategies, processes or systems, the PROLOGIS team works together closely with the customers to find the best possible solutions for the challenges at hand.  


Copyright @ 2013 PROLOGIS AG & ch-aviation GmbH

All rights reserved. This study or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.


An in-depth analysis of their network expansion strategies and the impact on the EU carriers

How the major three Gulf carriers are quickly and steadily drawing a new and different “world map” of aviation …


The condensed market study by PROLOGIS and ch-aviation clearly shows how Middle East airlines are revolutionizing the airline industry and exerting pressure on the traditional market leaders and their alliances. Nothing is as constant as change, but hardly ever before has change been as dynamic as it is today.

Authors: Hanna Schaal (PROLOGIS) and Thomas Jaeger (ch-aviation)


Middle East carriers racing for world market share

To download the following analysis as a PDF file click here.


September 6, 2012 – Emirates and Qantas announce a new global aviation partnership. October 8, 2012 – oneworld officially invites Qatar Airways to become a new member. October 8, 2012 – Air France-KLM and Etihad Airways make their major new codesharing agreement public.

Within the short period of a month, three of the world’s fastest growing airlines are racing for new ways to extend their current networks. But it is not a race that has only just begun. Over the last couple of years, Emirates, Etihad Airways and Qatar Airways, the three big Middle East carriers, have more and more risen to the airline industry’s surface and are now about to position themselves at the leading edge: Aviation’s global market has reached a point where its focus is shifting from the old network carriers to the new airlines from the Gulf. As a result, the European airline industry’s market structure is changing. As the Middle East carriers inexorably spread out their networks, European airlines cannot help but accept the fact that they have to deal with these rapidly growing rivals.

Current developments

So let’s have a closer look at what is currently going on in the global aviation market and how things are changing. The Emirates-Qantas partnership agreement is scheduled to take effect on March 31, 2013. However, the 10-year joint venture agreement goes way beyond being a simple codeshare by including coordinated pricing, sales, and scheduling, as well as revenue sharing on the “Kangaroo Route” (now renamed “Falcon Route”) linking Australia with Europe. Furthermore, Emirates and Qantas are referring to a “benefits sharing model” with joint promises to treat each other’s customers as their own. [1] The Australian carrier will terminate its unprofitable Frankfurt route and only offer two daily A380-800 services from Melbourne and Sydney to London (down from five daily services some years ago). Furthermore, the new partnership with Emirates will replace all Air France-Qantas codeshare flights to Paris, as well as all Cathay Pacific-Qantas codeshare flights to Rome. But most importantly, Qantas is going to quit its joint-service agreement with oneworld partner British Airways after 17 years in March 2013 in favor of the agreement with Emirates.

Just four weeks after the Qantas and Emirates partnership was announced, both Qatar and Etihad, on the one hand, but also Air France-KLM and British Airways on the other had already responded: In New York, oneworld and Qatar unveiled that the Arabic airline is going to join the smallest of the three alliances (#1: Star Alliance, #2: Skyteam) over the next 12-18 months, with Qantas partner British Airways acting as the sponsoring airline. This partnership will extend oneworld’s network by fifteen destinations and three countries [2] and Qatar will be its 14th alliance member. On the very same day, Air France-KLM and Etihad announced a codeshare agreement which allows Etihad to offer its customers a wider network within Europe and gives Air France-KLM access to Etihad’s geographically well located hub in Abu Dhabi. Air France-KLM is Etihad’s 40th codeshare partner; however, it states that this new business deal would be “the first phase of a much larger strategic partnership” [3]. Etihad started codesharing with Air France on flights between Paris CDG and Bordeaux, Copenhagen, Madrid, Nice and Toulouse on October 28; and on the same day on KLM flights between Amsterdam and Abu Dhabi, Billund, Cardiff, Newcastle, Oslo and Stavanger. Air France and KLM currently offer connections via Abu Dhabi to Colombo, Islamabad, Lahore, Mahé, Malé, Melbourne and Sydney. On top of this new partnership, Etihad managed to extend its network within Europe even further by pushing oneworld member Air Berlin, in which it holds a 29% minority stake, into a codeshare partnership with Skyteam member Air France-KLM. It is still too soon to say how well this partnership will work out.

In summary, all of the above mentioned strategic initiatives can be interpreted as the Gulf carriers looking at better access to the European market; and with Air France-KLM, British Airways, and Qantas realizing that they themselves should also make use of the advantages of the business models and hub locations of their competitors in the Middle East. However, this is not a phenomenon that came up only recently. According to this joint study by ch-aviation and PROLOGIS, over the last five years, the three Middle East carriers (Emirates, Etihad and Qatar) have together added a total of 95 new routes (a 46.1% increase of their networks) departing from their hubs. All three carriers pursue the same target: They want to give their networks higher reach in order to attract more customers transiting through their homebases. Nevertheless, their expansion strategies seem to be quite different: Whereas Emirates focuses on organic growth and tries to operate as much traffic as possible with its own aircraft, Etihad invests in bilateral partnerships. It holds equity investments in Virgin Australia (10%), Air Berlin (29%), Air Seychelles (40%), and Aer Lingus (3%). Beyond this, it has over 40 codeshare agreements with a few carriers who have recently moved their flights from Dubai to Abu Dhabi to benefit from Etihad’s willingness to partner (i.e. Garuda Indonesia and Hainan Airlines). With the announcement of joining oneworld, Qatar has decided to take a third route as a member of one of the world’s alliances. Though different, all three strategies will help these airlines to achieve their goal.

To highlight the various expansion strategies and network focus of the three carriers analyzed in this study, we have conducted an analysis of the destinations, frequencies, capacities and ASMs (Available Seat Miles) from the hubs at Abu Dhabi (Etihad), Doha (Qatar), and Dubai (Emirates) for the weeks of Monday, December 3, 2007 and Monday, December 3, 2012. It is based on a combination of schedule data from ch-aviation pro/Innovata (2012) and Cedion/Innovata (2007).

All three carriers – Emirates (EK), Etihad (EY), and Qatar (QR) – have extended their networks, frequencies and overall capacity massively during the last five years, despite the global financial crisis and the Arab Spring at their doorsteps:

Destinations served:

As expected, Asia and Europe are the two markets with the highest number of routes served by the three carriers, with Africa being a distant third. Europe has grown the most in terms of new routes being added (62.5% more routes being served now) among these markets. The Americas are growing much faster but from a much lower base. Emirates has served the most destinations on every continent (with the exception of Asia/Middle East) back in 2007 and still does today, but Qatar Airways has been able to narrowing that margin in Africa and Europe in the meantime. It has also started expanding to Australia and Latin America during the last five years.

Weekly frequencies:

While the three analyzed airlines have grown the number of routes served by 46.1% over the last five years, frequencies have actually increased by 80.4%, showing that the carriers have started to concentrate on serving existing routes more frequently than before. The average weekly frequency per destination has increased from 8.44 to 10.41 weekly flights. Emirates on average offers 12.11 weekly flights to each destination already and has increased frequencies on many European routes for example to at least two daily services allowing connections during its two biggest connection banks in Dubai. This is making the Gulf carriers’ product more appealing to business travelers which value frequency more than leisure travelers.

Weekly capacity (seats):

Weekly Capacity has grown even slightly faster at 83.7%, indicating the deployment of larger aircraft in the airline’s fleets. From the hubs at Abu Dhabi, Doha, and Dubai, the three carriers now offer a total of 853’659 seats per week compared to just 464’729 back in 2007. Emirates has essentially doubled its capacity in just five years’ time with Qatar Airways not far behind. Etihad Airways has grown slower during the same timeframe, showing its more conservative and collaboration driven growth approach.

Weekly capacity (ASM – Available Seat Miles):

Last but not least, the weekly number of Available Seat Miles has grown by 109.8%, clearly indicating that the carriers are starting to increasingly serve destinations further away from their hubs, and have introduced more long-haul routes to their networks. Emirates alone almost offers double the number of available seat miles as the other two Gulf carriers together, also thanks to its high number of non-stop services from Dubai to the Americas and Australia.

More detailed statistics on the airlines’ network growth are provided below by carrier (maps generated by Great Circle Mapper highlighting new routes in yellow and routes cut in red):


Emirates network changes by Continent:

Africa (4+1):

Added (6): Cape Town, Dakar, Durban, Harare, Luanda, Lusaka

Dropped (2): Alexandria, Tripoli

Future Additions (1): Algiers

Asia (7+1):

Added (7): Baghdad, Basra, Erbil, Guangzhou, Ho Chi Minh City, Kozhikode, Madinah, Tokyo

Dropped (1): Nagoya

Future Additions (1): Phuket

Europe (10+1):

Added (10): Amsterdam, Barcelona, Copenhagen, Dublin, Geneva, Lisbon, Lyon, Madrid, Prague, St. Petersburg

Future Additions (1): Warsaw

North America (5):

Added (5): Dallas/Fort Worth, Los Angeles, San Francisco, Seattle/Tacoma, Washington D.C.

Oceania (1):

Added (1): Adelaide

South America (2):

Added (2): Buenos Aires, Rio de Janeiro

Etihad Airways

Etihad Airways network changes by Continent:

Africa (4+1):

Added (4): Lagos, Nairobi, Mahé, Tripoli

Future Additions (1): Addis Ababa

Asia (18):

Added (18): Ahmedabad, Almaty, Astana, Baghdad, Bangalore, Basra, Beijing, Chengdu, Chennai, Colombo, Erbil, Hyderabad, Kozhikode, Malé, Nagoya, Seoul, Shanghai, Tokyo

Europe (6):

Added (6): Athens, Dusseldorf, Istanbul, Larnaca, Minsk, Moscow

North America (1+1):

Added (1): Chicago

Future Additions (1): Washington D.C.

Oceania (1):

Added (1): Melbourne

South America (0+1)

Future Additions (1): Sao Paulo

Qatar Airways

Qatar Airways network changes by Continent:

Africa (5):

Added (5): Benghazi, Entebbe, Kigali, Kilimanjaro, Maputo

Asia (12+5):

Added (15): Ahmedabad, Amritsar, Baghdad, Bangalore, Chongqing, Erbil, Goa, Guangzhou, Hanoi, Kolkata, Kozhikode, Madinah, Phuket, Shiraz, Tokyo

Dropped (3): Cebu, Damascus, Nagpur

Future Additions (5): Chengdu, Gassim, Najaf, Phnom Penh, Salalah

Europe (14):

Added (15): Ankara, Baku, Barcelona, Belgrade, Brussels, Bucharest, Budapest, Copenhagen, Nice, Oslo, Sofia, Tbilisi, Venice, Warsaw, Zagreb

Dropped (1): London Gatwick

North America (2+1):

Added (2): Houston, Montreal

Future Additions (1): Chicago

Oceania (2):

Added (2): Melbourne, Perth

South America (2):

Added (2): Buenos Aires, Sao Paulo

Fleet Growth and Expected Fleet Plans

The Gulf airline’s network extension is also reflected in their fleet development. With regard to fleets, ch-aviation data from 2007 and 2012 reveals that the three carriers have jointly added a total of 177 new passenger aircraft (Emirates: 83, Etihad Airways 38, Qatar Airways 56). Meanwhile the passenger fleets of their European counterparts Air France-KLM * (from 580 to 574 aircraft) and International Airlines Group ** (IAG, the holding owning British Airways and Iberia) (from 391 to 383) have decreased. Only Lufthansa *** and its subsidiaries were also growing their fleets (from 591 to 618 aircraft).

* Including subsidiaries Brit Air, Cityjet, KLM cityhopper, Régional, Transavia, Transavia France and VLM.
** Including subsidiaries BA CityFlyer, Iberia Express and Open Skies.
*** Including subsidiaries Air Dolomiti, Austrian Airlines, Edelweiss Air, Eurowings, germanwings, Lufthansa CityLine, Swiss, Swiss European Air Lines and Tyrolean Airways.

Taking publicly available information about planned aircraft retirements into account, Emirates, Etihad, and Qatar Airways combined are still planning to add another 213 new aircraft to their fleets over the course of the next five years (excluding freighters). In contrast, Air France-KLM, IAG and Lufthansa have all announced their plans to cut costs and capacity in response to the current competitive situation in Europe (pressure from LCCs, on-going financial and economic crisis and the growing competitors in the Middle East).

Emirates has mainly focused its growth in the last five years on the B777-300(ER) (increase from 29 to 80 aircraft) and on the A380-800 (from 0 to 27). It will continue to concentrate on these two aircraft types for the next five years and plans to triple its A380-800 fleet in that timeframe, while almost doubling its B777-300(ER) fleet. It is instead expected to retire its lower capacity A330-200, A340-300, A340-500, and B777-200 subfleets, showing an indication of its strategy to increase capacity and traffic volumes on existing routes as one of its key growth drivers. Looking at the overall capacity of Emirates’ fleet, it is expected to grow its passenger volumes even faster within the next five years, presuming it sticks to its current aircraft delivery and disposal plan.

Emirates Fleet:

Etihad has more than doubled its fleet during the past five years, and plans to do so again in the next five years to come. However, unlike Emirates, about half of this growth has come from building up a fleet of currently 18 narrowbody A320 family aircraft, after initially launching operations with a fleet of just widebodies. This has allowed Etihad to increase frequencies and the number of its destinations within its regional network from Abu Dhabi to the Middle East and the Indian subcontinent. This is more reasonable with narrowbodies, also given the fact that Abu Dhabi is still a smaller Origin & Destination market than Dubai. Etihad will however have to significantly increase its growth rate going forward, if it plans to go ahead with the deliveries of its 10 A380-800s, 7 B777-300(ER)s, and 25 B787-9s by 2017. This increase is a much bigger jump from where the airline stands now, compared to what it has reached within the past five years.

Etihad Airways Fleet:

Qatar Airways has grown in a comparable fashion to Etihad, with 28 new A320 family narrowbodies joining its fleet in the last five years. These have also been used for its major expansion into Eastern Europe within the same timeframe. Qatar has also introduced the B777, taking delivery of a total of 27 aircraft with additional 7 B777-300(ER)s on order. As the first Middle East carrier it has taken delivery of the first B787-8 “Dreamliner” last month. The airline is planning to operate with 30 B787-8s by 2017. Qatar Airways also has outstanding orders for 43 A350-900s, 37 larger A350-1000s and 50 A320neo family aircraft, which eventually will partially replace its existing fleet beyond 2017. The majority of its growth over the course of the next years will initially come from B787-8 and B777-300(ER) deliveries. This shows the expected capacity increase or the launch of more long-haul routes, temporarily moving up the ladder with less short-haul narrowbody expansion than in recent years.

Qatar Airways Fleet:

How did they get this far?

The fact, that the Gulf carriers have impressively grown and spread out their networks within the past five years, is quite obvious given by the analysis results above. But what is their secret of success which has helped them to reach their current positions fairly quickly?

The three largest Gulf carriers essentially capitalize on a set of very favorable geographical conditions, coupled with very aviation friendly policies of their respective governments. Their hubs (Dubai, Abu Dhabi, Doha) are located in a strategically very advantageous position in the world with most of Africa, Europe, the Middle East, Indian subcontinent, and much of South East Asia within 6-8 hours flying time. This gives them access to a large percentage of the world’s population and traffic patterns between these regions. In addition, the three cities allow long-haul flights non-stop to Australia and the Americas. So essentially, any relevant destination around the world can be reached from their hubs non-stop. This puts the carriers into the position of being able to compete for connecting traffic on many ultra-long-haul city pairs with high demand (i.e. London-Sydney, San Francisco-Mumbai, Tokyo-Sao Paulo etc.) and one-stop service. And most of their competitors have no competitive advantage, as they cannot serve the markets non-stop either.

Based on the ch-aviation and Prologis study, Air France-KLM currently offer flights to 23 destinations in the Asia-Pacific region from Europe, International Airlines Group (British Airways/ Iberia) 15, and Lufthansa together with its subsidiaries Austrian and Swiss 21. Their three Gulf based counterparts currently can offer between 33 (Etihad) and 40 (Qatar) destinations from their hubs and consolidate demand from Africa, the Americas, Europe and the Middle East for these services. Thanks to their hub’s relative proximity to markets with large populations, they can offer one-stop itineraries on smaller city pairs, i.e. itineraries such as Birmingham-Ahmedabad, Milan-Sydney, Vienna-Kuala Lumpur etc. On many such city pairs, European carriers cannot easily compete. They are often not in a position to offer a comparable one-stop service from any European airports other than their hubs.

Besides the geographical advantage, the governments of the emirates of Dubai and Abu Dhabi as well as Qatar have early on looked at aviation as one of their key industries as part of a general strategy to turn their countries into business, financial and tourism centers. And this obviously cannot be achieved without having significant air links. Emirates publishes its financial reports and has been consistently profitable for the past two decades, according to its audited financial statements. The carrier often publicly states that it has never directly received capital from the government again since it originally started operations. In fact, it is now a very profitable airline, typically outperforming its competitors in Europe and Asia.

It is an open secret, however, that both Etihad and Qatar have received a lot of additional capital from their governments to finance initial losses, while building up their large networks. Although, both are stating they are now profitable, they have yet to publish audited financial results which would substantiate these claims. Be that as it may, it is, however, probably too easy for European and North American carriers to point their fingers at their fast-growing competitors in the Middle East, given all of the government bailouts which the carriers have directly or indirectly received over the past decades. Moreover, the legal framework in North America has allowed all carriers there to get rid of unwanted obligations through bankruptcy protection. Presumably from an economic perspective, these massive government investments in the aviation sector will eventually pay off as part of their general master plans.

Another advantage of the Gulf carriers to consider is the aviation friendly legal and business framework in Qatar and the United Arab Emirates: No night flight bans, new airports and terminals being built to accommodate capacity, no trade unions, the ability to easily employ foreigners from third world countries at lower wages, no taxes, and so on. These benefits theoretically would also be available to other carriers in the region. But combined with what has been said above, Emirates, Etihad, and Qatar could establish themselves as the key players in the region.

And last but not least, a success factor of all three Middle East carriers is comparably higher product quality. Qatar Airways has been Skytrax’ “Airline of the Year” in both 2011 and 2012 – an indicator for Passenger Satisfaction levels based on passenger surveys. Etihad and Emirates were among the 10 best airlines both this and last year. According to these surveys, none of the old network carriers like Lufthansa, British Airways, Air France-KLM, American, Delta or, United can compete with such high quality and service levels. To quote USA Today [7]: “[…] the Gulf airlines have positioned themselves atop global customer-satisfaction rankings by flying new planes and offering luxurious international service to an increasing number of destinations.”

In conclusion, all three carriers certainly benefit from an advantageous geographic position and favorable legal and business frameworks, and on top of that, are able to win customers by offering a high quality product yet reasonable in price.

Impact on European carriers

The ch-aviation and Prologis analysis was able to review the impact of the massive growth of the three big Gulf carriers on European Union scheduled carriers (excluding leisure carriers such as Blue Panorama, Condor, Thomson Airways etc.) to destinations in Asia (excluding the Middle East and Central Asia) between 2007 and 2012.

All EU carriers combined have barely changed the total non-stop capacity in these markets in five years. Between 2007 and 2012, Air Berlin (long-haul routes were still operated by LTU back in 2007) and Malev have left the market of non-stop services: Even prior to its bankruptcy, Malev cancelled all long-haul routes; and after Etihad’s acquisition of a large minority share in Air Berlin, the German carrier’s network was restructured. Asian services are now routed through Abu Dhabi (Phuket is currently still served daily by Air Berlin, but from Abu Dhabi and not non-stop from Germany). LOT has instead entered the market currently only serving Beijing from Warsaw.

In contrast to the development of EU scheduled carriers, Emirates, Etihad Airways, Qatar Airways and Turkish Airlines (see below) have meanwhile been able to almost double their capacity on routes between their hubs and Asia (from 176,106 to 353,722 weekly seats). This shows that the European airlines have not necessarily lost traffic volume but have simply not been able to participate in the growth in these markets. It would be unfair to assume that the entire increase in capacity between the Middle East and these Asia-Pacific markets analyzed would come from European passengers. Anyhow, the proportions show how different capacity developments have been between the two groups of carriers.

Looking at destinations in particular, the EU carriers have especially sustained losses in markets where they were geographically most exposed to competition by their three rivals from the Gulf (in India, the Maldives, the Philippines, Thailand, as well as the China’s South).

Instead they have been able to compensate for these losses further north where for geographical reasons the four southerly hubs of Abu Dhabi, Doha, Dubai and Istanbul are less of a threat with Kuala Lumpur and Singapore being the only two exceptions to this rule.

The growth of the four carriers has therefore had a significant impact on EU carriers on routes where they are directly exposed to one-stop connections from the new hubs.

How do European carriers react?

In response to these developments over the course of the last five years, European carriers have started to change their competitive strategies. Both Alexandre de Juniac, chairman and CEO of Air France and Sir Martin Broughton, chairman of British Airways admitted that the old adage ‘if you can’t beat them, join them’ applies to their current strategic behavior: It was only last year when Jean-Cyril Spinetta, the previous CEO of Air France-KLM group, said: “The Gulf companies are killing our industry.” [8] Now the former enemy has become codeshare partner. And instead of any further complaints about unfair competition due to government support, British Airways, through its parent IAG, decided to invite one of the rivals on board its worldwide alliance. According to Sir Martin Broughton this decision came along with a “strategic shift” of British Airways in order to meet its customers’ demands. [9]

With Air-France-KLM and Air Berlin partnering with Etihad, and British allying itself with Qatar through oneworld, Lufthansa is the only one of Europe’s three big carriers who does not cooperate with any of the three big Middle East counterparts. Albeit, strictly speaking the former German flag carrier was first to partner with one of the Gulf carriers: After almost 13 years Lufthansa ended its cooperation with Qatar Airways on January 1, 2012. The airline justified the decision saying that the business deal did not provide a win-win situation to it anymore [10]. Although Lufthansa does not preclude a new partnership with one of the Middle East carriers invariably, the German airline is currently in talks with its Star partner Turkish Airlines about an even closer partnership combining the strategic advantages of both carriers.

Spotlight on Turkish Airlines

Istanbul-based Turkish is Europe’s third largest carrier by passenger traffic, and currently operates approximately 850 flights a day to 205 destinations with a fleet of 194 passenger aircraft, according to data from ch-aviation. It has been capitalizing on its equally well positioned hub to capture a massively growing number of transfer traffic from Europe to Africa, Central Asia, the Middle East, and the remainder of Asia. Similar to the three major carriers in the Arabian Gulf, Turkish brings together a combination of a lower cost base (thanks to Turkey’s relatively cheap labor), its advantageous geographical position, strong inbound tourism demand, and aviation friendly government policies (the Turkish government still owns a large minority share of approximately 49% in Turkish Airlines). Although the country has also been hit by the recession which followed the beginning of the world’s financial crisis, it has reversed its negative GDP growth rate of -4.8% in 2009 growing 9.2% in 2010 and 8.5% in 2011 according to the World Bank. Unlike Emirates, Etihad, and Qatar Airways whose domestic air travel being fairly (UAE) or totally (Qatar) irrelevant, Turkish is able to capitalize on its GDP growth on the domestic market in Turkey. Solely on its domestic services from Istanbul Atatürk, the airline has increased its available capacity by 26.8% between December 2007 and December 2012, offering 801 weekly departures to 32 destinations this month.

To a large extent, Turkish still is a short-haul carrier serving Europe, Central Asia, the Middle East, and Northern Africa. However, with its already delivered and still outstanding long-haul aircraft orders (see fleet analysis below), this is changing. Turkish has made a massive push into Africa during the last 2-3 years, and is quickly establishing itself as a major force in many markets. It is thereby making use of the geographically more advantageous location of Istanbul for connections from Europe to Africa. Between December 2007 and December 2012 weekly flight frequency from Istanbul to Africa increased more than fourfold from 30 to 153.

Turkish Airlines network changes by Continent (Routes from Istanbul Atatürk only):

Africa (19+4):

Added (19): Abidjan, Accra, Alexandria, Benghazi, Dakar, Dar es Salaam, Djibouti, Entebbe, Hurghada, Kigali, Kilimanjaro, Kinshasa, Misurata, Mombasa, Mogadishu, Nairobi, Nouakchott, Sebha, Sharm el Sheikh

Future Additions (4): Douala, Niamey, Ouagadougou, Yaoundé

Asia (24+2):

Added (10): Aden, Aleppo, Baghdad, Basra, Dammam, Dhaka, Erbil, Guangzhou, Ho Chi Minh City, Islamabad, Jakarta*, Kabul, Madinah, Mashad, Malé, Mosul, Najaf, Novosibirsk, Osh, Shiraz, Sulaymaniyah, Taif, Ulaanbaatar, Yanbu

Future Additions (2): Isfahan, Kermanshah

* Turkish Airlines has launched Singapore-Jakarta as an extension to its Singapore route from Istanbul Atatürk, the route has been intentionally removed from the map above to make its size fit this format.

Europe (21+1):

Added (23): Aalborg, Adler/Sochi, Bilbao, Billund, Birmingham, Bologna, Bremen, Edinburgh, Genoa, Gothenburg, Gyandzha, Leipzig/Halle, London Gatwick, Lviv, Malaga, Nakhichevan, Naples, Podgorica, Thessaloniki, Toulouse, Turin, Ufa, Valencia

Dropped (2): London Stansted, Strasbourg

Future Additions (1): Santiago de Compostela

Turkey (4)

Added (4): Amasya, Hatay, Igdir, Küthaya, Sinop

Dropped (1): Eskisehir

North America (3+1):

Added (3): Los Angeles, Toronto, Washington D.C.

Future Additions (1): Houston

South America (1+1):

Added (1): Sao Paulo

Future Additions (1): Buenos Aires

Within the same time period, the airline has doubled its fleet from 92 to 194 passenger aircraft (growing its long-haul and short-haul fleets in a similar fashion) including the B737-700s and B737-800s operated under the AnadoluJet brand on domestic low-cost carrier services. It has just recently announced that it has given up plans to order A380-800s or B747-8s instead opting for another 100 narrowbody aircraft to be ordered before the end of 2012 or in early 2013. This move underlines its strategy of increasing the short- to medium-haul business in line with its long-haul services. 15 additional A330-300s and B777-300(ER)s will bring its long-haul fleet to 63 aircraft by 2017 according to current plans (assuming the retirement of its ageing A340-300s).

It is obvious that Turkish as “Europe’s Best Airline” (Skytrax Award 2011 & 2012) and with its network and strategy is already a feared rival to the Middle East carriers. Should the contemplated tie-up between Turkish – one of the fastest growing airlines in the world – and Lufthansa – Europe’s largest airline in terms of passengers carried – really become true, it would constitute the second largest airline group after Delta Air Lines based on capacity with roughly 3.8 million weekly seats compared to 3.9 million for Delta. [11] According to [12] Turkish’s CEO Temil Kotil wants to get to a decision regarding the possible close alliance within the first quarter of 2013.

However, let’s not forget the Emirates-Qantas joint venture starting in April 2013. Even though, for now the arrangement is mainly focusing on European connectivity, future global extensions are likely to follow. So on the one hand, there are Emirates and Qantas partnering outside any global alliance. On the other, there is Etihad having bilateral agreements with both Air Berlin in oneworld and Air France-KLM in Skyteam (with both now also codesharing, following Etihad’s strategic lead).

Will the role of the worldwide alliances change?

With regards to these new partnerships, it is a legitimate question to ask how the role of the three worldwide alliances is affected due to the current developments. It does not seem like Emirates shows interest in joining any of the “big three” in the near future. The airline labeling Star, Skyteam and oneworld as an “anachronism” [13], better suited to the nineties, where they came up as an answer to financial difficulties of network carriers is highlighting Emirates’ attitude towards the alliances very clearly.

IATA (International Air Transport Association) CEO Tony Tyler recently said: “Alliances help airlines offer very competitive fares on other airline networks. So consumers can go around world at competitive prices.” [14] Will the three alliances be able to maintain this unique role? Or will new giant partnerships such as Emirates and Qantas, or Etihad, Air Berlin, and Air France-KLM be able to compete with the alliances by offering joint networks with global reach as well based on bilateral agreements? For now, what we know for certain is that due to the Emirates-Qantas partnership, the Australian carrier is going to end its close cooperation with British Airways in Europe after 17 years (the carriers will still continue to codeshare). And as mentioned above, Qantas will also cut its already very loose links with Cathay Pacific by dropping the codeshare agreement for the only route where the carriers have recently cooperated (Hong Kong-Rome). As BA and Cathay Pacific are both members of oneworld, this means that the alliance loses traffic to Emirates. And also Skyteam’s network is affected by the new match due to Qantas ending the Air France codeshare on the route to Paris. To sum up the new Qantas-Emirates partnership has an effect on the alliances, and it does not look like it is a positive one.

The Etihad – Air Berlin – Air France-KLM cooperation will most certainly have some kind of impact on both oneworld and Skyteam.

The critical airline to look at is Air Berlin – on the one hand oneworld member since March 2012, on the other now cooperating with Skyteam member Air France-KLM as a by-product of its Etihad partnership. So Air Berlin is somehow caught in the middle. And Etihad does not care – which is not surprising given its successful strategy of entering into bilateral agreements as opportunities come up, regardless of alliance boundaries. Does the German carrier’s split position reflect the Gulf carriers’ emerging power towards the worldwide alliances? The airlines themselves are talking about an increasing flexibility towards global alliance membership. Both development and consequences of this flexibility remain to be seen but there seems to be an early indication that bilateral agreements and joint ventures, globally or for specific markets, might just as well be more important than alliance membership going forward.

Nothing is constant except change …

… and this also applies to the development of the three big Middle East carriers. This article outlined how Emirates, Etihad, and Qatar were able to reach their top positions within the world airline industry. Based on the ch-aviation and Prologis analysis, we have been able to demonstrate how the three airlines have managed to pass their European rivals in certain markets and positioned themselves at the leading edge within just a few years. The airline industry is in the midst of yet another revolution, and a new era within global aviation lead by the three big Middle East airlines is about to start. But again – nothing is constant except change. So even though it looks like Emirates, Etihad, and Qatar are currently looking toward a bright future, eventually, no one knows if this envisioned future will come true or is subject to change, for example if all of the additional capacity to be made available from their hubs over the next decade will prove to be excessive.

To download the analysis as a PDF file click here.


About Prologis and ch-aviation


PROLOGIS ranks as one of the world’s leading management consultancies that specialize in the aviation industry thanks to its more than 15 years of experience and over 45 airline customers served.

With an average of 7 years of practical experience working for airlines, airports and ground handling companies, the PROLOGIS consultants are recognized experts on the following topics:

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ch-aviation is managed by a team of passionate aviation professionals from Switzerland, Germany and Austria. Since 1998 offers a wide range of tools and search options targeted at aviation industry professionals to get access to the most extensive and up to date airline knowledge base in the world. It provides comprehensive weekly news updates covering global airline industry developments with a focus on strategic network and fleet developments, airline start-ups and bankruptcies as well as mergers, acquisitions and strategic partnerships. Weekly Airline Route Network Update systematically track network changes of over 700 airlines worldwide. ch-aviation also tracks more than 37.500 individual aircraft, in excess of 5.500 airports and airlines with access to worldwide airline schedules and route networks.


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