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Middle East Airlines Edging European Rivals on Asia Routes

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Emirantes is one of the 'new kids' on the block with deep pockets to expand.
  • Why it matters

    Why it matters

    Aviation regulations from a bygone era are hindering European airlines in the competition against Middle Eastern carriers for travel to Asia.

  • Facts

    Facts

    • Abu Dhabi-based Etihad Airways has ownership control over Germany’s Air Berlin.
    • Germany’s federal minister of transport wants to reform country’s air traffic regulations.
    • Growth in the airline industry is taking place primarily outside Europe.
  • Audio

    Audio

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Etihad Airways out of Abu Dhabi is headed for Europe.  The emerging airline has just secured 49 percent of Italy’s Alitalia. It already owns 29 percent of Germany’s Air Berlin and 3 percent of Irish airline Aer Lingus, and is interested in Swiss regional carrier Darwin. The Gulf airline also has a cooperation with Air France-KLM.

But many are asking whether financially troubled Air Berlin has any future at all. Until now, Etihad’s money has been able to prevent the worst at the German carrier but there are limits set to its rescue efforts. By law, non-European stockholders are not allowed to own more than 49.9 percent of a domestic airline, otherwise, valuable air traffic rights might be lost.

The old world of aviation has lots of regulations like this, all of which date to a time when international air traffic largely took place between the industrially developed nations. The object was to protect domestic aviation from unwelcome aggressors. Shaped by experiences of the Cold War, matters of national sovereignty stood at the center of these regulations.

The fact that we can’t continue with the old regulations in a changed new world is also dawning on those with responsibility for the issue in the German federal government. Germany’s federal minister of transport, Alexander Dobrindt, is urging for a modernization of the country’s concept of air traffic.

Behind the enormous growth of airlines such as Emirates and Etihad are governments that have made it a national objective to promote aviation.

The new world of air traffic functions completely differently than the old one we have been trying to protect up to now.

Growth is taking place primarily outside the industrial nations – in Asia and Oceania, as well as Africa and South America. Everywhere, airlines are being established and airports built. This shows how emerging nations, particularly, see air traffic as an opportunity for economic advancement. If you are tied into the global air traffic network, you have completely new opportunities.

The economy is competitive, and the country profits from it.

In the Gulf region, as well as in Turkey, investments are being made in such visions. The airline based in Dubai, Emirates, is not even 30 years old, but the international routes of today can hardly be imagined without it. The millionaire soccer players from Real Madrid, Arsenal London, AC Milan and Paris Saint-Germain all wear the airline’s logo on their jerseys. When Germany won the World Cup in Brazil in July, the exhausted but happy players stood between Emirates stewardesses.

Behind the enormous growth of airlines such as Emirates and Etihad are governments that have made it a national objective to massively promote and quickly develop and expand aviation. That the airlines are owned by the United Arab Emirates naturally makes it easier.

But they don’t just leave it at direct state subsidies alone.

Dubai is building its Airport World Central International only 45 kilometers (28 miles) from the existing airport. The new airport is supposed to be able to handle up to 160 million passengers a year beginning 2020. It is a gigantic project, considering the old airport can handle 66 million passengers, which is already 10 percent more than Frankfurt, Germany’s large airport, can cope with.

In Istanbul, a little less than 4,000 kilometers northwest of Dubai, a new mega-airport is also under construction with a capacity of 150 million passengers a year.

These monster airports are strategically located on the route from Europe to Asia. And they plan to work at full capacity. Many feeder flights – and that includes subsidiaries of Etihad – will see to it. The major West European hubs in Frankfurt, Paris, Amsterdam and London will feel the impact.

But many markets are created only through growing prosperity.

In Asia, for example, about 600 million people can be reached from Singapore in four flying hours. The local airlines will be handling that business, not the established carriers from the Old World.

The old carriers carry on letting themselves be protected. Air traffic taxes and fees and bans on nighttime flights make it difficult for them to compete in a changing world. They won’t be able to struggle this way forever against the dynamics and the slipstream of the new world of aviation.

The author can be reached at: schnell@handelsblatt.com

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