Dubai Airshow

Regional Sales Forecasts Reflect Importance of Middle East as Hub

 - November 12, 2017, 8:00 AM

The Middle East, most particularly the Arabian (or Persian) Gulf area, is the center of the commercial-aviation universe, according to the manufacturers. "The unique geographic positioning allows [local] carriers to capture a significant share of long-haul market growth," according to Embraer. "The concept of connecting through the region is decades old, but the competitive landscape is ripe for broadening and passengers will likely benefit from increased competition."

Airbus agrees, pointing out that the location provides an aviation stepping stone between almost any two global geographic points: “Most people are just one flight away from the Middle East. The region’s proximity to the world’s population and growth markets has been a key in its aviation success."

Operating at the crossroads between Asia, Africa, and Europe, the region's airlines are well positioned to compete for connecting traffic, says Boeing, which forecasts 20-year Middle East demand for 3,350 jet passenger and cargo aircraft of all sizes. "About 80 percent of the world’s population lives within an eight-hour flight. Growth prospects for these connecting markets are strong—driven by expected improvements in regional GDP per capita."

Boeing characterizes leading long-haul airlines "in or near the Middle East" as "global 'super-connector' carriers," a sub-category of network airlines, whose location will "help drive higher-than-average growth on those routes." These airlines have a “one-stop-to-anywhere” business model that focuses on providing connections between markets to the east and west of their hubs and helps drive higher-than-average growth on those routes. Boeing says that the region's carriers have captured significant [market] share from Europe to destinations such as Australia, India, and Southeast Asia.

The Middle East, which Airbus does not define by constituent territories, will need some 2,588 new passenger and cargo aircraft by 2036, approximately 520 for replacement of older-generation aircraft, and around 2,070 for growth, says the European manufacturer. It expects 730 current machines to remain in service in 20 years' time. The perceived demand comprises 1,082 single-aisle and 1,078 twin-aisle designs, and 428 very-large aircraft (VLA), plus 22 midsize and 40 large freighters. {[These numbers do not add up. I added the numbers in the last sentence and got 2650, which is about 100 more aircraft than is mentioned in the first sentence. I do not have the press release to resolve}}

Boeing sees requirements in the region (including Egypt and Iran, but not Turkey) for 3,350 new jetliners: 20 regional jets (of up to 90 seats), 1,770 single-aisle machines, 590 small twin-aisle designs, 910 medium, large and very-large twin-aisle aircraft and 60 freighters of all sizes.

Canadian manufacturer Bombardier, whose Middle East market forecast includes Cyprus, Iran, Israel, Turkey and 12 regular Arab states, estimates a 20-year market for 200 large regional aircraft (with at least 60 seats) and 250 machines in the up-to-150 passenger single-aisle category.

Embraer predicts Middle East requirements for 2,440 new airliners over the coming 20 years. Demand for these aircraft arises from fast-expanding traffic (revenue passenger-miles/kilometres (RPM/K), the Brazilian manufacturer saying that by 2036, the Middle East and Asia Pacific will be the quickest-growing markets at an average annual growth of "around 6 percent." For their parts, Airbus and Boeing put such growth at slightly lower rates of 5.9 and 5.6 percent per .year, respectively, compared with global increases they put at 4.4 and 4.6 percent, respectively.

Origin and destination (O&D) traffic to, from, and within the region has grown, says Airbus. "In Dubai, for example, 46 percent of passenger traffic is O&D, with a further 17 percent intra-regional connecting passengers" starting and ending journeys in the Middle East.

The Middle Eastern economic outlook "remains supported by substantial petroleum resources, proximity to energy-intensive Asian economies, growing tourism potential, and strategically important geopolitical location," according to Airbus. It nevertheless reports that economic growth is currently restrained by "low oil prices and fiscal tightening."


With particular interest in the large regional and small single-aisle aircraft that fly "a majority of intra-regional routes," Bombardier notes falling Middle East airline profitability. "Double-digit capacity growth in the past two years was achieved at the expense of decreasing yields due to [the] emergence of low-cost carriers."

The Canadian manufacturer sees the Middle East lagging behind global markets in terms of regional penetration, a situation it expects to change with "intra-regional traffic to grow at [8.8 percent annually]. Fleets in the 60- to 150-seat segment will need to grow to match passenger growth."

Bombardier predicts that higher market penetration and improved yields will follow if airlines can more closely match capacity to traveler numbers through so-called "right-sizing" of equipment.

And that could happen, given an expected slowdown in twin-aisle aircraft deliveries in the region. "This presents a great opportunity for fleet planners to re-examine and re-balance the fleet mix to develop intra-regional connectivity, which has been largely bypassed in favour of inter-regional networks."

Embraer agrees: "Intra-Middle East flow will be an increasingly large part of traffic," connecting through major hubs or in point-to-point operation linking secondary cities. "Indeed, there is plenty of room to right-size [down] from large narrow-bodies and even wide-bodies (often used as de facto regional aircraft)."

For Airbus, airlines' right-sizing in the region means being prepared for local growth. "The five 'mega' cities in the Middle East will more than double to eleven over the next 20 years."

Warning that regional economic development is countered by a continued cycle of local conflict, Bombardier concludes that geopolitics will heavily influence developments. "As the world’s crude inventory remains at record levels and other non-Organization of Petroleum Exporting Countries continue to ramp-up production, Middle Eastern countries will need to adapt for long-term prosperity."