Long-haul, short-haul, and domestic markets grow
Middle East airline traffic is projected to grow 6.4 percent, compounded annually, during the next 20 years. Revenue passenger-kilometers will more than triple by 2031, supported by healthy development of long-haul, short-haul, and domestic travel.
The "Gulf 3"--Emirates, Qatar Airways, and Etihad Airways--provide the largest part of the region's long-haul service, operating under "sixth freedom" agreements to connect two foreign countries via a stop in the carrier's home country. Favorably placed to connect Asia, Africa, and Europe, the Middle East is relatively new to the sixth freedom business model, which has been proven by both European and Asian carriers.
The Middle East also generates its own long-haul origin and destination traffic, with business and leisure hubs in Dubai, historical and resort sites in Egypt, beaches and natural wonders in Oman, and growing Hajj pilgrim traffic to Saudi Arabia. Guest workers from South Asia and other regions also boost traffic to the region.
Low-cost carriers, with simplified networks and operations--often flying a single, narrowbody airplane type--are taking an increasing share of the region's short-haul traffic. The single-aisle fleets of airlines like Air Arabia and flydubai can reach many destinations in South Asia, Europe, the CIS, and Africa.
Fleet renewal a priority
Middle East carriers often prefer to renew their fleets on a 15-year cycle, a shorter cycle than the global average. Thus, of the 2,370 forecast airplane deliveries to the region, about 30 percent will replace older airplanes, leaving 70 percent for the region's fleet growth.
Policy and infrastructure crucial to growth
Infrastructure development is a long-term concern for the region's carriers. Although the region's airspace is not yet crowded, large areas of airspace remain under military control, limiting the airspace available for commercial traffic. At smaller airports, the capacity of immigration areas and check-in desks is not well aligned with services that airlines aim to provide.
Middle East governments are moving toward coordinated aviation policy and market liberalization. The UAE, for example, makes funding and political support available for infrastructure and airport development; aviation is not heavily taxed, and visas are easy to obtain. Saudi Arabia is moving toward market liberalization, with plans to privatize Saudi Arabian Airlines. In 2011, the Kingdom's General Authority of Civil Aviation (GACA) began soliciting bids from foreign carriers to operate domestic services. Additional opportunities include relaxing the price controls on domestic airfares.