Fleet additions increase pressure on smaller long-haul players
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Oman Airs announcement last week by that it will launch non-stop services to London Gatwick should surprise no one. The Oman Governments decision earlier this year to exit the Gulf Air enterprise was largely put down to the lack of direct intercontinental capacity that the shared airline was bringing to Oman.
With the state focusing resources and attention on its strategically important tourism sector, it elected to renationalise the carrier and acquire long-haul aircraft. And London – with its population base, demographic make-up, powerful business sector and travel profile – is almost every Middle East carrier’s most important European destination.
Oman Air has acknowledged that the long-haul game is not for the faint of heart and is likely to generate losses in its early stages, but it believes the fundamentals exist for ultimate success. However, it is not known whether their assumptions made provisions for the type of fleet build-up acceleration that is currently marking the regional sector.
The latest sign of this phenomenon is the recent statement by Emirates that it intends to raise its A380 orders from the current 55 to 110 units, or possibly more, of the super-jumbo. Although it is currently precluded from implementing such a programme by the lack of airport capacity at its home base in Dubai, the under-construction Dubai World Central International Airport in Jebel Ali, combined with upgrades to the existing Dubai International Airport, will make such plans logistically possible in the not-so-distant future.
Having a neighbour carrier operating 110 A380s, not to mention up to 100 B787s or A350 XWBs, is a daunting proposition that can only impact the other carrier’s operating in the region. The Dubai flag carrier’s statement that it intends to manage a fleet of 180 widebody aircraft and serve 110 destinations by 2015 is something the Gulf’s other carrier must consider.
This kind of capacity will necessarily have an impact on all the Middle East carrier’s revenues. Filling A380s will require lower fares, fares that the unit costs of a 500-seat aircraft can perhaps support, but which will perhaps be less viable with the unit costs of a mid-size widebody. Carriers that have based their business plans around ticket prices of a certain level may need to reopen their spreadsheets to examine the structural soundness of their operations. This exercise will not be much fun for smaller players or newcomers to the long-haul game.
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Fleet additions increase pressure on smaller long-haul players
