Value of orders at the show exceed India’s annual tax revenues
The recently concluded Dubai Air Show 2013 broke all records for aircraft orders placed at an air show. Driven by the “Gulf Big 3”, Emirates, Qatar Airways, and Etihad Airways, the show clocked orders exceeding a mind-boggling, $206 billion, underscoring the power shift in the commercial airline industry to the Gulf, and in the process toppling the crown long held by air shows like Farnborough and Paris.
These gulf carriers have long eclipsed their western competitors like Lufthansa, Air France, and British Airways, in fleets, passengers, and routes, and with their new swanky shopper paradise airports, are now, giving the highly respected Cathay Pacific and Singapore Airlines a run for their money. European governments are now resorting to restrictive tactics to slow the growth of these behemoths, while in the United States, aviation industry professionals are calling on their government to stop US Exim Bank funding of aircraft exports to these airlines.
How have these three gulf airlines come to become such a massive force in global commercial aviation? Several factors have led to this.
Over the last 50 years while the entire middle-east earned significant money from oil and gas, the three tiny city-states of Dubai, Qatar, and Abu Dhabi were relatively small players in the oil world compared to their neighbours Saudi Arabia, Kuwait, Iraq, and Iran.
Credit must go to rulers of these countries who realised, early on, the need to develop alternate industries to oil. Using the income from oil and the advantage of their geographic location, the Emirs and Sheikhs of these three Gulf states should be applauded for having the business acumen to rely on a history of trade going back millennia, and embarking on a long-term vision to link various countries together, this time transporting people not just goods.
Through a coordinated action plan, they recruited good industry professionals as leaders, invested in aviation infrastructure, not limiting themselves to airlines, aircraft, and airports, but slowly and surely entering in to all the support and peripheral businesses, an aviation hub requires. Ground handling, flight kitchens, maintenance, repair, engineering, aviation IT, and now aero components manufacturing. And many of these businesses are no longer confined to their home states.
The results are nothing short of astounding. Growing from just one leased aircraft, in less than 30 years, Emirates of Dubai has grown to become the largest airline in the world measured by scheduled international passenger-kilometres flown, and the third largest airline by capacity measured in available seat-kilometres (ASKs). dnata, part of the Emirates group, is today, one of the largest suppliers of air services in the world offering aircraft ground handling, cargo, travel, and flight catering services across five continents and 37 countries, and Dubai airport ranks up amongst the best.
In a “if they can do it, so can I” mode, Qatar Airways has also grown to become a member of the oneworld alliance, while fellow Emirati carrier Etihad Airways is growing leaps and bounds, both organically, and inorganically. While their European competitors are shrinking, the Gulf Big 3 have all become members of the “six continents club”. Today, anyone can fly from almost any location to almost any destination, anywhere on the planet, on each of these three carriers, with just one stop in their gulf home base.
Another demonstration of the clout of these airlines is the way in which they have essentially forced the two large aircraft companies Boeing and Airbus to develop new aircraft specific to their requirements. The Boeing 777X is a classic example. The size of this mini-jumbo coupled with the long range is exactly what Tim Clark, the boss of Emirates, has been demanding from some time now. It may not suit 90% of Boeing’s customers, but for the Gulf Big 3, it is perfect. The 777X will carry up to 400 passengers from Clark’s Dubai hub, to Los Angeles in west and Auckland in the east. Developing aircraft is a multi-billion dollar gamble, and buying aircraft worth hundreds of billion to be delivered only after six years shows the long term commitment and confidence these airlines and their sheikh/emir owners have.
The politicians of India, along with other countries in South Asia and Africa should claim credit for the growth of these carriers.
Shackling their national carriers in subservience, they readily gave up their national markets, enabling these fledglings to grow in to behemoths carrying the ever increasing international travellers from these emerging economies to destinations in Europe and North America.
The three carriers have muscled their way, using any and all means, to gain massive seat allocations. As an example, with 189 flights and over 50,000 seats per week, Emirates is considered the unofficial national carrier of India. Its market share of India’s international traffic is over 14%, and India contributes at least 11% of Emirates’ world-wide traffic. Qatar Airways with about 100 flights has similar demographics, and very recently, Etihad used its clout to get an almost 300% increase in seat allocations from India. One can expect Emirates and Qatar, to use Etihad as an example, and come back to the Indians demanding more.
Orders more than India’s tax revenues
To put $206 billion in perspective. At Rs. 61 to a dollar, it is Rs. 12,56,600 crores, compare this to Rs. 12,35,870 crores, the total amount of taxes the Government of India is hoping collect this fiscal year. Even at a 35% discount, the orders add up to Rs. 8,17,000 crore which is close to the total tax collected by central government, net of the share given to the states. Staggering is the only word that comes to mind.
Jobs and industry
The Gulf rulers ensure further development of the aviation industry in their countries. Boeing forecasts the region will require 40,000 pilots and 53,100 technicians, at an expected annual rate of 2,000 pilots and 2,600 technicians, over the next 20 years. Mubadala Development Company PJSC a wholly owned investment vehicle of the Government of Abu Dhabi, has obtained manufacturing ventures and purchase commitments from both Airbus and Boeing of at least $5 billion each in new age technologies like carbon-fibre, special coatings, heat treatments, and other aerospace parts. Similar commitments were taken from major sub-system vendors like engine manufacturers GE Aviation and Rolls-Royce.
India’s civil aviation, foreign, and commerce ministers would serve their nation better by learning from the Gulf instead of spouting platitudes on how the massive increase in Etihad’s seat allocation will be good for the Indian consumer.
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