Having established their prominent position in global travel markets by focusing on long-haul routes, Middle East carriers are now looking increasingly at local opportunities, on the assumption that short- and medium-haul markets will play a big role in future regional growth, according to Airbus. Meanwhile, the operators will continue to link the world’s growing urban population centers with twin-aisle (or widebody) jetliners.

Competing manufacturer Boeing points out that there is no particular over-riding business model in various airline partnerships that feed Middle Eastern hubs, saying “[Among] organic growth with selective code-sharing, equity stakes in [different] out-of-region carriers, and traditional alliance membership, no single strategy has emerged as dominant.”

Boeing observed, in its latest Current Market Outlook (CMO) 20-year worldwide forecast, published in June, that each strategy provides opportunities for carriers to co-ordinate schedules across national borders, “further enhancing the appeal of services connecting the Middle East.”

Boeing now perceives global demand for 38,050 new airplanes during 2015-34, an increase of 3.5 percent from last year’s forecast. The CMO estimates these machines will have a catalogue-price of some $5,600 billion. Global passenger traffic (revenue passenger-kilometres/miles) will grow at about 4.9 percent per year. Within the total, Boeing foresees Middle East demand for 3,180 aircraft (see table).

For its part, Airbus puts 20-year requirements at 32,600 jetliners (with more than 100 seats) nominally valued at $4,900 billion. The European company’s Global Market Forecast (GMF) sees traffic increasing annually at a slightly lower 4.6 percent, according to advance statistics released at the Paris Airshow in June 2015. (Note that by early October, Airbus had not yet published its new 2015 GMF document: accordingly, other Airbus comments here come from last year’s market analysis.)

In 2014, Airbus foresaw 20-year demand in the region for 2,148 aircraft, of which more than 800 would be single-aisle (or narrowbody) designs: “Middle East carriers are developing more ‘connectivity’ to local destinations and intra-regional routes.

“A dedicated single-aisle fleet has multiplied [in size] by three in the last 10 years. The largest carriers are focused on strong positions in long-haul markets, [but] short- and medium-haul possibilities are numerous,” said the OEM.

Regional Aircraft

Brazilian manufacturer Embraer, which offers small jetliners with 70-130 seats, projects global 20-year requirements for 6,350 such machines; including 2,250 aircraft with 70-90 seats and 4,100 in the 90/130-seat sector. It shares Boeing’s perception of 4.9 percent per year continuing global traffic growth and foresees regional needs for 220 aircraft offering 70-130 seats.

Embraer recognizes Middle Eastern carriers’ successful strategy of using geographic location to establish global networks, but–like Airbus–sees requirements for greater numbers of less-capacious machines. “Although carriers are focused mainly on long-haul flights, there are good opportunities for intra-regional aviation, [for which] a flourishing tourism industry and business environment fostered by governments are the main drivers.”

The number of intra-regional Middle Eastern “city pairs” (up to 2,000 nm apart and suitable for its products) more than doubled during the 2004-2014 period, according to Embraer. Claiming that around two-thirds of intra-regional flights operated by aircraft with 130-180 seats last year carried fewer than 130 passengers, the company argues that its smaller machines could help airlines “to open new markets and add frequencies in existing markets.”

Meanwhile Boeing says that innovative Middle Eastern low-cost carriers, having reduced short-haul fares, established cross-border subsidiaries and developed mobile booking portals, are evolving to offer business-class seating and to expand into under-served areas such as the Commonwealth of Independent States.

Canadian manufacturer Bombardier, which produces turboprops and regional-jets with 60-150 seats, forecasts 12,700 worldwide aircraft deliveries valued at $650 billion during 2015-34. Within this total demand, the company predicts Middle Eastern demand for 300 aircraft with 100-150 seats and 150 machines able to accommodate 60-100 passengers.

As an indication of momentum in Middle Eastern development, Boeing cites the region alongside the Far East as an emerging market. “In 1994, airlines in Europe or North America carried more than 73 percent of all traffic. By 2034, that share will shrink to 38 percent, with Asia/Pacific and Middle East airlines becoming prominent in global aviation,” predicts Boeing.

Likewise, Airbus highlights recent growth: “The share of [global] passenger aircraft operated by [Middle Eastern] carriers has doubled in ten years. To foster continued economic development, the region is establishing an impressive fleet.”

As Dubai’s Emirates Airline discovered–and, more recently, Qatar Airways and Etihad in Abu Dhabi also found–the secret to establishing long-haul route networks lies in accidental geography. Boeing says that a base in the Gulf “at the crossroads between Asia, Africa, and Europe” allows airlines to link many parts of the world with a single flight connection, which helps “drive higher-than-average growth on those routes.”

This geographic advantage has permitted such Middle Eastern operators to capture significant long-haul market share from European network carriers on routes to Australia, India, and Southeast Asia, according to Boeing. “[They] are well positioned to compete for [connecting] traffic. About 80 percent of the world’s population lives within eight hours’ flight of the Gulf, allowing [local] carriers to aggregate traffic and offer one-stop service between many city pairs that would not otherwise enjoy such direct itineraries.”

Airbus agrees: “[Some] 99.9 percent of the global urban population is within a range of 15,000 km (about 9,375 miles) [of Abu Dhabi, making it] the most ‘central’ city in the world. Seven of the [top ten such cities] are [in] the Middle East. Medium- and long-haul routes between the [region] and Asia/Pacific or Europe constitute the core growth markets for traffic.”

In the past decade, Middle Eastern airline capacity (available seat-kilometres/miles) has almost quadrupled thanks to increases from Emirates, Qatar [Airways] and Etihad, which accounted for 70 percent of [capacity] flown by Middle Eastern airlines in 2014, says Embraer. This “solid” trend has led the manufacturer to forecast that the region will see traffic increase at 6.8 percent annually for the next 20 years, comfortably ahead of the manufacturer’s predicted 3.8 percent/year regional GDP growth.

Airbus puts GDP growth in emerging economies at 5.8 percent per year, with rates in regions such as the Middle East exceeding global averages. “[Here, capacity has] multiplied three and a half times between 2003 and 2013. The number of tourists has doubled, with Saudia Arabia, United Arab Emirates, Jordan and Iran welcoming higher numbers.”

In addition, airline traffic between the Middle East and Africa is “about to take off,” believes Airbus. “Much growth should be expected for inter- and intra-regional [flows], with the development of low-cost carriers helping to further stimulate demand.” Embraer puts Middle East alongside China as the “fastest-growing markets with an average annual [traffic] growth rate of around 7.0 percent.”

To leverage the region’s geographic advantages and prominence in business travel, carriers are continuing to favor twin-aisle models and premium passenger services, says Boeing. In the coming 20 years, “the Middle East will take delivery of the greatest number of large widebody airplanes and the second-greatest number of medium-widebody airplanes because of the number of people transiting through the region.”

Airbus confirms the region’s preference for larger equipment. “While four percent of the global population live in the region, 14 percent of all widebody aircraft are operated from [the Middle East]. This is the only region where the widebody fleet is larger than [the] single-aisle [one].”

Diversifying Economies

Aircraft demand in the Middle East highlights the region’s challenges, including continued development of local and regional markets while reinforcing its global position, according to Airbus. “The medium-term economic outlook remains supported by substantial petroleum resources, growing tourism potential, and [its] strategically important geopolitical location,” says the European company’s forecast.

As the region fosters non-oil-related development and activity, the manufacturer cites UAE General Civil Aviation Authority statistics illustrating the industry’s increasing importance: “The aviation industry contributes [around] 12 percent of [local] GDP and targets a 15-percent contribution by 2016. Over the longer term, Middle Eastern GDP growth is forecast to average about 3.8 percent per year.”

Given the region’s dependence on income from oil and gas exploitation, Middle Eastern countries have been working for years to diversify their economies, says Embraer. Moves include “spending high levels of public capital and accelerating private-sector credit, supporting non-oil economic activities that now represent 60 percent of [regional] economic output, compared to 20 percent in the 1980s.”

Such efforts are reflected in the long-term view of GDP growth, which is estimated to be 3.8 percent annually over the next 20 years, according to the Brazilian manufacturer. “This is mainly influenced by medium-term economic growth due to the region’s geo-political position and tourism potential.”

The success of the region’s major long-haul carriers “does not mean that there are no significant challenges to be met, particularly with respect to air-traffic management, regulation, and overcapacity on long-haul sectors,” warns Embraer. ­

Middle East infrastructure

Middle Eastern governments’ recognition that air transport is integral to economic development and diversification has led to investment in airport facilities, says Boeing. “Although much activity focuses on the region’s main hubs, smaller airports are significantly upgrading, from building new terminals to expanding into international airports.”

The manufacturer notes several “significant” projects scheduled or under way in Manama (Bahrain), Cairo (Egypt), Tehran (Iran), Kuwait City (Kuwait), Muscat and Salalah (Oman), Doha (Qatar), Riyadh and Jeddah (Saudi Arabia), and Abu Dhabi, Dubai, and Sharjah (United Arab Emirates).

Nevertheless, operational challenges remain in the Middle East, according to Boeing. “Large sections of airspace remain under military control, reducing [that] available for commercial traffic. The region’s air-traffic control (ATC) systems are not centralized, leaving a patchwork of rules, agencies, and processes.”

The manufacturer says that regional authorities are “working to address these needs,” and that recent discussions of ATC coordination [among] the countries of the Gulf Cooperation Council and their neighbors “show signs of progress.”