The UAE’s commitment to placing first globally in the airline service quality index is unwavering and, far from sitting on their laurels, Dubai’s carriers are upscaling across all classes.
Despite the current immobility of its Boeing 737 MAX fleet, flydubai has invested heavily in transforming its cabins, products and on-board services. Its new flatbed business class suite, developed in response to passenger demand and showing the airline’s commitment to growth, is also adding value with potential to rival the in-seat experience from a high-end full service airline.
Flydubai’s hybrid business model allows the airline to offer not just low fares, but a premium product, comfortably asserting its position as a unique standalone brand in the GCC low-cost airline market.
Similarly, Emirates is poised to introduce a new premium economy product aboard its A380s, following on from the 2017 reveal of its superlative first-class suites and a total refresh of its economy and business class cabins.
Not only will this allow Emirates to tap into a more competitive yet price sensitive market, it will be the first airline in the Middle East to offer a product that sits across both economy and business class.
In tandem with opportunity, a few major challenges have affected airline competitiveness. These include improved on-board products and new aircraft from competing inbound carriers, as well as strengthened codeshares with non-Dubai hubs that have opened up market access for non-UAE airlines.
Emirates and flydubai haven’t stood still, however, transforming their pricing structures and improving cabin crew staff training methods for increased customer focus. They are also investing heavily in new generation planes like the 777X and 737 MAX to ensure that when they do eventually shift to the new airport at Dubai World Central, they will be able to monetise their physical advantage over all rivals.
The emirate of Dubai – the world’s fourth most visited city according to Mastercard's Global Destination Cities Index 2019 – is bracing itself for a huge influx of traffic due to new infrastructure developments.
The AED30 billion development of Al Maktoum International Airport and AED28 billion expansion of phase four of Dubai International airport are just part of the picture with the aviation sector gearing up across the country. In the capital, the AED25 billion development and expansion of Abu Dhabi International Airport is on track with AED1.5 billion investment pegged for Sharjah’s airport.
As it stands, airport infrastructure investment is a by-product of the expansion of the UAE’s major airlines. With the recent announcement of Air Arabia Abu Dhabi (AAAD), the UAE is clearly diversifying the customer bases it wants to tap into and, by extension, airports need to grow to cater for that demand.
The real impact of the newly formed Abu Dhabi airline will be potential traffic loss for Sharjah. The availability of low-cost travel from another emirate will also potentially capture Dubai residents living close to the Abu Dhabi border.
AAAD will definitely bolster Etihad’s bottom line. It’s also likely that the aircraft will come directly from Air Arabia’s existing inventory, so as to save time and get the airline operational. This is an important advantage, given that ordering a new jet comes with a three to four-year wait due to the huge A320neo backlog as well as that of the 737MAX.
Etihad and Air Arabia do not benefit like Emirates and flydubai from having the same ownership structure and location, so the two Dubai-based behemoths will likely be unaffected by this announcement. They may lose some traffic to either Etihad or AAAD but given the prospect of the 737MAX returning to flight service in 2020 and flydubai benefiting from that, then passengers will be back on track to enjoy the seamless link in Dubai between these two carriers.
The announcement that India’s SpiceJet will set up a new carrier based out of Ras Al Khaimah is also unlikely to affect Dubai’s airlines as there is little sign that a new carrier can stimulate enough demand to justify a standalone operation there.
UAE a global hub
The UAE, and Dubai in particular, is already a de facto natural transit nexus for global travel, so it stands to reason that the development of new traffic rights, new routes and expanded aircraft range capability will allow airlines to harness the added capacity that new airports offer.
A simple six-hour flight from anywhere in the UAE, particularly its busiest hub in Dubai, places the country within the radius of more than 3.5 billion people. That’s almost half the entire global population. When you consider how many city pairs have been established and how many remain underserved, the argument for the UAE to enter into more international open skies pacts becomes self-evident.
There will be benefits for others within the transportation chain as well, not only the carriers. Dubai’s air services provider, Dnata, for example, has business presence across the globe and this will not only enhance existing on-ground services but also add value tointegration with Emirates and flydubai at their outstations. The result is improvedefficiencies, economies of scale and stronger revenues.
The March grounding of the Boeing 737 MAX fleet had global repercussions for the aviation sector and even once the fleet resumes operation there will still be a number ofglitches to resolve, including getting the existing grounded MAX aircraft updated with new software, flight tested and ready for delivery. This is no small feat given the inventory build- up of the last eight months.
The upside is that airlines operating the MAX will get one of the safest jets in commercial aviation history, bringing with it new technology, fuel economy and unprecedented levels of passenger comfort, harnessed through innovations found on the 787 Dreamliner and 777X.
Airlines will also reap the rewards of the MAX’s fuel efficiency in a price-erratic world affected by oil and fuel cost shocks, while allowing them to phase out older models. There’s no escaping the fact that the industry needs the MAX. Right now, patience is required until regulators are satisfied that the type is green-lighted to re-enter commercial service.
Looking forward, the future is bright. In addition to Dubai’s five-year run as the fourth most visited city in the world, Mastercard also named Abu Dhabi as the fastest-growing city in the Middle East and Africa, with a compound annual growth rate (CAGR) of 16.7 per cent between 2009 and 2018 in overnight arrivals.
The statistics speak for themselves. According to the International Air Transport Association (IATA), the aviation industry could contribute $128 billion (AED470bn) to the UAE's economy by 2037, up from $47.4 billion currently, if authorities continue to prioritise the industry's importance.
And Dubai will continue to play a key role as both one of the world’s major hubs and a natural transit choice for business and leisure passengers. As Dubai World Central makes its presence known, there is no doubt that its goal of 300 million passengers by 2050 will be relatively easy to attain, especially once the UAE converts more of its military airspace for commercial use.