Jetrader - November/December 2011 - 20

Table 5 – Intra-Middle East destinations served to/from select cities Intra-regional destinations to/ from Sharjah Dammam Beirut Dubai Doha Intra-regional ﬂights/wk Sharjah Beirut Kuwait Doha Dammam Dubai Source: Innovata East. The Chinese Diaspora has also spawned another high growth market for Middle East carriers. Flights from the region to China have grown at an annual compound rate of 18 percent over the last ﬁve years with seat capacity up 23 percent over the same period due to the deployment of large widebody aircraft, especially A380s, on these routes. While China is an important growth market for Mideast carriers, at no more than 2 percent of total network capacity, it remains one of several key markets for the Mideast airlines. 24 83 150 228 123 340 71 127 238 299 162 452 166 275 415 578 306 837 19.9% 11.9% 10.0% 9.1% 8.9% 8.8% 2000 2005 2011 Compound growth p.a. 2000 – 2011 9.8% 4.4% 2.5% 2.1% 1.6%

7 12 13 24 16

14 18 13 24 16

19 19 17 30 19

Table 6 – Middle East carriers - Commercial aircraft inservice (minimum 100 seats) Single Aisle Twin Aisle Freighters Total End 2000 128 184 27 340 157 284 37 478 End 2005 Sept-2011 352 442 65 859 10% 9% 9% 9% Compounded growth pa 2000 - 2011 Owned/ 144 298 32 474 Finance Lease Operating 208 144 33 385 Lease Source: Ascend

Regional Competition
With the explosion of longer haul services to/from the Middle East, regional governments turned their focus to developing intra-regional services. The emergence of Air Arabia in 2003 was the precursor for a number of new lower cost, short-haul operators that have launched in recent years, including FlyDubai, Jazeera Airways, Bahrain Air, NasAir, among others. The impact of these new carriers has been quite profound, especially Sharjah— the home of Air Arabia. (See Table 5.)

Middle East Fleet & Order Book
Given the backdrop of rapid growth in passenger trafﬁc seen in the region, along with many new start-up airlines commencing operations, the region has been fertile ground for the major OEMs. The regional ﬂ eet has seen impressive growth over the last decade, growing more than 150 percent from 2000 to now. (See Table 6.)

Location, Location, Location
With the advent of modern, fuel-efﬁcient widebody aircraft— especially the A380 and B777-300ER/B777-200LR—Mideast carriers have gained two distinct advantages. Firstly, these aircraft are capable of operating non-stop from the Arabian Gulf to any major city in the world. Secondly, these aircraft types allow the Mideast carriers to operate their growing network all year round and any time of the day—overcoming payload restrictions in peak summer temperatures. (See Table 4, page 19.) Table 7 – Middle East carriers - Commercial aircraft orders* (minimum 100 seats) Manufacturer Airbus Boeing Embraer Total Percent of installed base Single Aisle 119 72 7 198 56% 496 112% 12 18% Twin Aisle 305 191 Freighters 0 12 Total 424 275 7 706 82%

Conclusion
The region’s order book (see Table 7) reﬂects that the focus on growth and upgrading to newer technology aircraft is set to continue. While the fundamentals for the region and the opportunities from developing the increasingly global hinterland look favorable, a key challenge for the aircraft markets is to absorb the large number of leased aircraft to be returned to lessors from Mideast operators over the coming decade. Importantly, this should include the need for the market to digest a sizable number of mid-life A380s. Notwithstanding the persistent threat of competition within the airline industry, the success of the Mideast carriers, and their demands on the aircraft ﬁnancing markets, will require as much forward vision as it has taken to get the industry to its current position. Excellence in execution will also be necessary.

References:
Paul Hooper et al, 2011, “The development of the Gulf region’s air transport networks - The ﬁrst century”, JATM Peter Negline is head of strategy & market research at BOC Aviation. Contact him at peter.negline@bocaviation.com
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* Excludes unplaced orders by Mideast leasing entities. Source: Airbus, Boeing, Ascend & Embraer

20 The ofﬁcial publication of the International Society of Transport Aircraft Trading
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Jetrader - November/December 2011

Table of Contents for the Digital Edition of Jetrader - November/December 2011
