Middle East

Many growth strategies

Growth of Middle Eastern aviation outpaced the global average and will continue to do so, supported by a variety of growth strategies. Fleet expansion is the predominant strategy, with Emirates as the foremost practitioner.

Alliances and partnerships also contribute, as with the 2012 Emirates-Qantas codeshare agreement, or Qatar Airways' pending membership in the oneworld alliance.

Low-cost carriers tend to pursue growth through business model innovation: reducing short-haul fares, setting up national subsidiaries, and opening new avenues of access to air transport services.

Other strategies include the purchase of equity shares in other airlines. For example, Etihad invested in airberlin and Jet Airways, in order to grow quickly and gain access to new markets without fleet expansion.

Liberalization gains ground

Further support for growth could come from liberalization of industry regulations. The Kingdom of Saudi Arabia (KSA) took significant steps in 2012 toward opening its markets. Gulf Air (Bahrain) and Qatar Airways have been granted rights to operate domestic flights within the KSA. Competition will be allowed in the markets for ground services, and it is expected that Saudia will be privatized. More vigorous competition should result in better, more frequent, and lower cost services.

The opportunity to relax price controls on domestic KSA flights remains, though it has not been adopted as a policy goal. Price deregulation could bolster industry health, enhancing service quality over the long term.

Liberalization of the region's bilateral agreements is having important impacts. In the wake of Etihad's investment in Jet Airways, the UAE and India are set to increase weekly seating entitlements from 13,300 to nearly 50,000 seats by 2015. These entitlements, which will be available to qualified airlines on both sides, will spur competition.

Infrastructure and airspace development

Infrastructure development is a long-term concern. Although the region's airspace is not yet crowded, large sections remain under military control, limiting the airspace available for commercial traffic. The region's air traffic control (ATC) is not centralized, leaving airlines to manage flights within a patchwork of different ATC systems. Further, investment tends to target new runways and terminals, rather than ATC modernization. Awareness of infrastructure challenges is growing, and ongoing discussions between the Gulf Cooperation Council countries and their neighbors signal progress.