The Gulf states have been on the radar of the world's airlines since the 1930s. Then Dubai, a pearl-fishing port, served as a stopover for the flying boats of Imperial Airways (a forerunner of BA) on routes connecting London to distant colonial outposts. BA still serves Dubai but most of the tail fins at its vast main airport, which recently overtook London's Heathrow as the world's busiest for international traffic, carry the logo of Emirates, the small state's own network airline. The balance of power among the world's carriers has shifted.
A decade ago Emirates, Qatar Airways and Etihad Airways, based in Abu Dhabi, were insignificant. But these three “super-connectors”, in recent years joined by Turkish Airlines, increasingly dominate long-haul routes between Europe and Asia. Whereas most other international airlines rely heavily on travellers to or from their home countries, the super-connectors' passengers mostly just change planes at the carriers' hub airports on their way to somewhere else. Last year the four carriers flew about 115m people into and out of their hubs in the Gulf or Istanbul, compared with 50m in 2008. Their combined fleet has swollen to more than 700 aircraft and they have a further 900 or so on order.
The West's legacy airlines are understandably fearful of the super-connectors. All have grown at spectacular rates；Emirates is now by far the world's biggest international carrier. Europe's struggling national airlines, such as Lufthansa and AirFrance KLM (AF-KLM), were among the first to start losing market share to the super-connectors. They are now suffering the same devastation on long-haul routes that low-cost carriers (LCCs) like Ryanair and EasyJet have inflicted on their shorter routes. As Andrew Charlton of Aviation Advocacy, a consulting firm, put it：“The LCCs ate European airlines' lunch；the Gulf carriers are coming to eat their dinner.” Lufthansa says its Frankfurt hub has lost nearly a third of its market share on routes between Europe and Asia since 2005, with more than 3m people now flying annually from Germany to other destinations via Gulf hubs.
Now the grumbling is getting louder from across the Atlantic, as America's airlines begin to feel the heat. This week a lobby group backed by Delta, American and United Airlines released documents to back up a report it put out in February, accusing the three Gulf carriers of having been given $42 billion in assistance by their state owners in the past decade.
Emirates now publishes full accounts but Etihad and Qatar still do not. However, the American carriers' investigators dug up documents filed with regulatory authorities around the world, from Belgium to Australia, which in some cases include detailed accounts going back a number of years. Some of the benefits allegedly received by the Gulf airlines - such as zero-interest loans with no arrangements for repayment, and grants of land - would if confirmed seem to fall under the heading of subsidies.
Others, such as the low labour costs that the Gulf airlines enjoy, partly because of their home states' ban on unions, and the benefits they, like other businesses in the Gulf, gain from those states' generally low tax rates, would seem legitimate means of promoting business development. The cache of documents is enough to keep lawyers, accountants and trade economists arguing for years - but at the least it suggests that the Gulf three have some explaining to do if they are to justify claims they are standing on their own feet.
The legacy carriers gripe too about the massive airports, with cheap landing charges, that their home governments have built for the Gulf airlines. Although Turkish is part-privatised, it still enjoys strong support from government, which has ordered the building of a massive new airport on Istanbul's outskirts, with about twice the capacity of Heathrow, so its flag-carrier has space to keep growing.
Allegations of unfair advantages explain only so much, however. For one thing, the West's legacy airlines have not lacked for state protection of their own. For another, the super-connectors' rapid advance is in large part down to something out of policymakers' control - location. The Gulf is handily placed between Europe, Asia, Africa and America：all are in range of modern long-haul jets. Istanbul, on the edge of Europe, is a short-haul flight from 55 capital cities. Both are ideal for consolidating traffic to and from many destinations. Fares can be kept low because of the efficiency of their long-haul-to-long-haul model.
2/2Airlines, April 25th 2015 P54 (中東航空会社の隆盛)
The four super-connectors are spending huge sums expanding their fleets with the latest, most efficient jets. Their staff are young and keen, and the airlines spend lavishly on marketing in-flight service and widening range of destinations. In 2001 Emirates and Qatar both flew from 17 destinations in Europe. Now both serve 32. Turkish sucks up passengers from 84 European airports. Besides increasing the number of European cities it flies from, Etihad has taken stakes in several European carriers, including Alitalia of Italy and Airberlin of Germany. The super-connectors have likewise added lots of new destinations in Asia, whereas the European flag-carriers have expanded their routes maps more cautiously. As a result, the super-connectors' share of booming Europe-to-Asia travel has shot up.
In similar fashion the super-connectors and their hubs have been siphoning off an increasing share of air traffic into and out of Africa - still a relatively small market for aviation, but one that has grown rapidly, especially given Asian economies' interests in its natural resources.
And now they are ramping up their services to North America. To the dismay of America's international carriers, in the weeks since they launched their broadside against the Gulf airlines' alleged subsidies, Emirates has announced a new service to Orlando and extra flights to Boston and Seattle. Turkish, meanwhile, has just begun non-stop flights to San Francisco, its 11th destination in the Americas, and plans to add Atlanta and Mexico City, among others. As the super-connectors encroach onto American runways, passengers are likely to vote with their wheelie-bags. According to Skytrax, a research firm, they all ranked in the top ten of the world's best airlines. The highest placed of America's big three is Delta, at 49th.
The reaction of most of the established airlines has been two-pronged - complaining, and further rounds of cost-cutting on top of what the arrival of the LCCs. One exception is IAG, owner of BA. It managed to slash costs at Iberia and has avoided much of the turbulence created by the super-connectors. Indeed IAG, in which Qatar owns a 10% stake, recently pulled out of a European trade association saying the group's opposition to the super-connectors, led by AF-KLM and Lufthansa, was no longer consistent with its own position.
AF-KLM and Lufthansa themselves have tried to make up for years of bad management by beefing up their budget subsidiaries, Transavia and Germanwings. They have met stiff resistance from within. Pilots have gone on strike repeatedly over the past year to oppose various changes the airlines are making to become more competitive. AF-KLM has had the bumpier ride of the two. It issued three profit warnings in 2014, has shed 8,000 jobs over the past three years and plans to lose another 800 employees as it cuts investment and delays delivery of some new aircraft.
Berating the new opponents for perceived injustices has also failed so far. The legacy carriers want changes to the bilateral “open skies” agreements that have allowed the super-connectors access to European airports, and which they had supported back when the Gulf airlines were minnows. Lufthansa and AF-KLM have asked the European Commission to press for “fair competition” provisions for current and future air treaties. America's three big international carriers want the Obama administration to stop the super-connectors from adding routes.
Open-skies treaties can be watered down without ripping them up. Governments can dither and delay. Norwegian Air Shuttle, a low-cost carrier, has been hampered by American regulators, at the urging of industry lobbyists, in its efforts to expand services across the Atlantic. But so far there has been little overt gain to the incumbents from their griping.
Indeed, it may have done some damage. Delta's boss, Richard Anderson, gratuitously noted in an interview that the Gulf carriers are based in the part of the world that bred the terrorists responsible for the 9/11 attack on America, before apologising for the remark. And in response to the subsidy accusations levelled by American carriers, the Business Travel Coalition, a lobby group backed by travel agents among others, has begun drawing attention to the support that America's government has given to its aviation industry over the years.
The West's legacy carriers put a lot of effort into letting politicians know about their concerns. But the chances that the American and European governments will roll back their open-skies commitments and halt the expansion of the super-connectors do not look good. American and European makers of aircraft and engines, which are benefiting hugely from the expansion of the super-connectors' fleets, also form a powerful lobby. So do passengers, who have shown little sympathy for their struggling national airlines and plenty of interest in their rivals' cheap fares.
If anything, matters can only get worse for the legacy carriers. If Norwegian makes a go of low-cost transatlantic flights, Ryanair and others will pile in. China's huge, state-backed airlines are surely planning to boost their market share on Pacific routes. And the high profits that America's airlines have recently been enjoying at home are likely to encourage the expansion of low-cost carriers there. In all, the future looks poor for investors in the legacy airlines. For travellers, however, the age of cheap flying is set to go on and on.
