Gulf Airlines To Commit To Big Dubai Airshow Orders

The sight of Dubai International Airport during peak hours is still quite an experience. Dozens of Airbus A380s and Boeing 777-300ERs are moving around the airport, many of them waiting in line for takeoff to destinations in the Americas, Asia-Pacific, Africa or Europe. They are showing the sheer force of one of the world’s biggest airline hubs.

In just a few years, several more airports in the wider region may make for interesting watching, too. Delhi in India could be such a place or Mumbai, with Air India and IndiGo having placed orders for well over 1,000 aircraft. Turkish Airlines has had major ambitions for some time and now also an airport that is big enough to sustain them. In Jeddah, Saudi Arabia, also just a few flight hours from Dubai, Saudia is preparing to reinvent itself on the back of a growing fleet, only to be eclipsed by the new national carrier Riyadh Air launching operations from the country’s capital next year. Not to be forgotten, Qatar Airways and its expanding hub in Doha, plus Etihad Airways in Abu Dhabi, which is taking another turn in its strategic thinking—toward growing faster.

• Saudi Arabia to back aviation plans with investment
• India emerges as new competitor, Turkey to grow

There are currently two schools of thought with regard to what is cooking in the Middle East. One, represented by Avitas Senior Vice President Adam Pilarski, argues that another order bubble is developing and will burst at some point in the next few years as carriers realize that they all ordered aircraft for the same passengers.

Pilarski has identified two large order bubbles in the past few decades. The first emerged when lessors came up in the early/mid-1970s “and forgot to tell airlines not to buy aircraft because we will buy them for you,” as Pilarski told attendees at the recent International Society of Transport Aircraft Trading (ISTAT) Europe, Middle East and Africa conference in London. The second bubble he identified in the years around 2015—post-financial crisis and pre-COVID-19—“when too many aircraft have been sold” across all channels, he said. That boom peaked around 2017 and fully collapsed in 2020, for all the known reasons.

One might add that the significant concentration of long-haul traffic through Middle Eastern hubs has happened at the expense of carriers largely in Europe and Southeast Asia. That is why more than half of the world’s Airbus A380s ever built operated from just three bases in Doha, Abu Dhabi and Dubai. And as a side note: with many of the largest commercial aircraft having been retired elsewhere, the concentration has only become bigger.

Others take different views. Emirates President Tim Clark continues to point out that he is not worried about Riyadh Air and a revived Saudia. If Saudi Arabia implements its broader economic plans, the requirements for airline capacity will be enormous, he says, and Dubai may even benefit further as a transfer hub for workers en route to find new jobs in its neighboring country.

India may be a different story, Clark adds. Emirates has been lobbying the Indian government to lift the capacity cap to and from the United Arab Emirates so the airline can carry more traffic between the two countries. The revival of Air India as a strong force in the long-haul market and IndiGo’s ambitions to deploy a large number of Airbus A321XLRs on direct routes to Europe will eat into the traffic pool Emirates has become accustomed to.

Andy Cronin, CEO of lessor Avolon, does not see an order bubble either. “Over the years, these types of concerns have been raised, whether that was China, Europe or the Middle Eastern carriers,” Cronin said. “Overall, it looks like things are actually in a pretty balanced mode for the next 10-15 years.

“Will there from time to time be spots where there’s too much capacity going into one part of the world? Yes. But the nature of our industry and in fact the value that [lessors] bring to our industry is we help that correct,” he said. “We take aircraft out of one backlog and put them in another part of the world. I don’t see something that causes a systemic shock or problem here for the industry.“

Avolon itself is betting big on India, with 10% of its portfolio positioned there. “It’s got the workforce, the demographics, the education standard, and it has made huge jumps,“ Cronin said. During the height of the COVID-19 pandemic, many former military airfields were opened to civil traffic. Yet, infrastructure development and more legal certainty for lessors remain challenges, Cronin said. Avolon had no exposure in the recent Go First bankruptcy, after which several lessors continue to try and repossess their aircraft.

Emirates has been using the Dubai Airshow as the stage for big aircraft order announcements. In 2013, the airline famously announced commitments for 50 more A380s and 150 Boeing 777Xs within 1 hr. It is likely similar news will emerge at the 2023 event, as the airline is closing in on defining its long-term fleet requirements.

The carrier currently operates 86 of its A380s, according to Aviation Week Network’s Fleet Discovery database. An additional 21 aircraft are still in storage, and 12 are parked. A backlog of repairs has built up during the long grounding of the fleet during the pandemic, as similar cracks developed in some wing components in the extreme environmental conditions. Almost all of the 777 are flying, only one is stored, and four are parked. Emirates operates mostly -300ERs, but also 10 -200LRs and 11 777 freighters.

The fleet is made up of a total of 263 aircraft. At the same time, Emirates has firm orders for 200 additional aircraft: 50 Airbus A350s, 120 Boeing 777-9s and 30 787-9s. The orders are mainly catering to short- to medium-term requirements. The airline has committed to more Boeing aircraft, mainly to replace the 777-300ERs. The five-year delay of the 777X program has meant that Emirates had to fly even its oldest -300ERs longer than it had previously planned. The good news is that the -300ER fleet is still relatively young by international standards: Only four aircraft are 17 years or older, and 93 are 12 years old or younger, so Emirates could very easily choose to operate them for at least 10 more years.

The two oldest A380s in Emirates’ fleet (A6-EDF and A6-EDJ) are now 17 years old, but the bulk of the fleet has been delivered over the last 10 years and, like the 777-300ERs, can be operated well into the 2030s. New interiors are currently being installed in both the A380s and the -300ERs.

Operating the A380s and 777-300ERs for much longer is actually the plan, however Clark has been vocal about the airline’s plans to seek an eventual A380 replacement. Given that Airbus no longer builds the type, the choices are limited. Emirates could buy more 777-9s, currently the largest commercial aircraft, or go for the A350-1000, which has gained popularity over the last few years. In June, Clark spoke about an order for up to 150 aircraft. One element to be considered is the status of the 787 order, which has been “under discussion,” Clark said. The long delivery delays and the fact that Emirates will start taking the first of its A350-900s in 2024 has had management wondering whether the two different types of similar size and range capabilities are needed.

When the A350s begin to arrive in the middle of next year, the airline can look at adding further destinations to its network, after having spent the past years reinstating pre-COVID-19 flying.

It is likely that Emirates will not be the only participant committing to spending billions at the Dubai Airshow. Two Saudi airlines, Saudia and startup Riyadh Air, are also expected to disclose the next step in their own fleet plans during the show. What they decide is likely to have an influence on the business of the other airlines in the region, given that both carriers are not only targeting origin and destination traffic but also connecting flows.

Under the leadership of Saudi Arabian Crown Prince Mohammed Bin Salman, the kingdom has decided to diversify its economy so it no longer relies purely on oil revenues. Tourism and travelhave been identified as two pillars of that strategy. That means the country needs stronger and larger airlines than it had in the past. Traffic in the region has been dominated by the three Gulf carriers in spite of the fact that Saudi Arabia is the largest, richest and most populous country.

Now, many expat experts are hired to fast-track development of the Saudi aviation sector, including turning around Saudia, building up Riyadh Air and constructing a new airport in Riyadh. AviLease is planning to make itself into a substantial player in the aircraft leasing market and has made a significant first step by taking over a portfolio of around 130 aircraft from Standard Chartered.

Saudia and Riyadh Air each placed an order for 40 787s in March. Now the carriers are finalizing the next step by deciding what narrowbodies they will operate. In Saudia’s case, any commitment will almost certainly be for the A320neo family and would also include aircraft for its low-cost affiliate Flyadeal. Industry sources say the Saudia Group will order about 100 aircraft, with 50 going to the legacy operation.

Riyadh Air has been rumored to be close to buying a large number of Boeing 737 MAXs. The airline, which is only to start scheduled operations in 2025, does not have a legacy fleet of aircraft and therefore does not have to take into account issues such as an installed base. Also, Boeing has open delivery positions from around 2027, whereas Airbus is sold out until 2029, so building a startup fleet quickly can be accomplished easier with a 737 MAX fleet. And with the aviation sector being state-run, politics are at play, too.

For both Saudia and Riyadh Air, narrowbody range will be an important element. Saudia is currently operating widebodies to some of its European destinations like Vienna, where narrowbodies would be more justified. And where it does use narrowbodies, they can only be operated with a payload penalty. The airline already has 15<\/p>

A321XLRs on order as part of a previous deal, but it could use a lot more of the aircraft on the European network and elsewhere. Riyadh Air wants to fly the narrowbodies in the Gulf region and to the Indian subcontinent. Even though the MAX cannot match the range capabilities of the A321LR or XLR in particular, all Indian destinations are well within reach from Saudi Arabia.

India will be a particularly important market for labor traffic as Saudi Arabia begins massive construction projects like Neom, the new Red Sea city. But Indian airlines themselves are also in growth mode, with IndiGo and Air India having ordered more than 1,000 aircraft combined. Air India and IndiGo are not only aiming at more direct flights to the Gulf, but Air India is also after connecting traffic in an attempt to recapture flows that have been diverted through Gulf carriers in the absence of a strong local long-haul airline. Riyadh Air CEO Tony Douglas claimed in a recent Reuters interview: “We are not here to set up a rival to anybody else. We are here to serve the kingdom and its population, to give them connectivity to the world.”

Given that the carrier is only flying from 2025 onward with a small fleet in the beginning, it will be many years before Riyadh Air can make a difference in the market. But in the long term, it will be one more player to be reckoned with in a competitive region.

Turkish Airlines is already a major and fast-growing force. It initially planned to announce one of the largest commercial aircraft deals for around 600 units at the International Air Transport Association (IATA) Annual General Meeting in June, but what is very likely going to be a split order between Boeing and Airbus was delayed by several months. And according to Murat Bas, senior vice president for fleet management and strategy, it will take the company some more time to come to a conclusion.

Turkish national elections were one early factor in the delay, with a new government settling in and having to get to an informed opinion—as Turkish Airlines is fully state-owned. The ongoing durability issues around the Pratt & Whitney PW1100G engines, along with the discovery of powder metal contamination in some engine parts, are giving Turkey’s flag carrier further pause. Bas said a double-digit number of Airbus A321neos is grounded already and the airline expects the number to increase significantly. Because of the issues and the growth planned at the same time, Turkish Airlines is already in the leasing market for about 100 aircraft over the next five years.

Turkey’s largest carrier has been growing at an annual rate of around 15% and is now looking at 6-7% annual growth from a much larger base. While the airline is able to operate to all of Europe, North Africa and Central Asia using narrowbody aircraft, the airline is not considering the A321XLR for now to extend narrowbody flying to true long-haul routes. The airline has been deploying 737-900s equipped with extra fuel tanks on some thin African routes. Those are now being replaced by 737 MAXs and A320neos.

Turkish Airlines has a large in-service widebody fleet, among them 54 A330s, 14 A350s, 39 777s and 20 787s. But its widebody orderbook is rather small, with 26 more A350s and 10 787-10s set to join the fleet based on current commitments—not nearly enough, even for replacements.

Like Emirates, Turkish Airlines has plenty of room to grow. But unlike the Dubai-based airline, it has already moved to its home city’s new airport. Emirates is still operating from Dubai International. Its move to Dubai World Central has been postponed several times and is still not planned for several years. In short, runway capacity at Dubai International continues to be a constraint. And with the arrival of the A350 and potentially the 787, operating to secondary destinations will be an even greater issue.

Qatar Airways’ growth trajectory has become steeper following the settling of its legal dispute with Airbus over surface degradation on several A350s. The out-of-court agreement included the reinstatement of a large A350 order. It now has another 19 A350-1000s scheduled to arrive, in addition to 50 A321neos. Of all the players in the region, Qatar Airways is placing the biggest bet on large freighters with an order for 34 777-8Fs. The airline was also part of the launch customer group for the -9 passenger variant and has committed to 40 of them.

And Etihad is taking another strategic turn under its new CEO Antonoaldo Neves. His predecessor Douglas—now the CEO at Riyadh Air—had tried to position Etihad as a boutique airline, abandoning to a degree the super-connector model followed by its larger rivals Emirates and Qatar. The fleet is to double between now and 2030 to 150 aircraft, according to the airline’s latest plans. And Etihad is actually the only one of the three that has orders for more aircraft than it currently operates, 99 versus 77 according to Fleet Discovery.

There are issues with the orderbook to sort out. Etihad still formally has eight 777-8s arriving that it appears to no longer want and development of which Boeing has pushed to after the 777-8F. For the 2030 goal, any 777-8s can almost certainly be discounted. Ironically, the carrier has not bought the -8F freighter, but rather seven A350Fs. Other widebodies to arrive are 17 777-9s, 21 787-10s, 9 787-9s and 15 A350-1000s, a mix of essentially all new models available. The carrier’s current fleet also includes 10 A380s, four of which have returned to service, according to Aviation Week’s Tracked Aircraft Utilization tool.