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Watch the trailer at: http://www.foxsearchlight.com/theclearing/index_nyt.html \----------------------------------------------------------/ In Mideast Aviation, Vying to Be New Global Hub April 13, 2004 By BORZOU DARAGAHI TEHRAN, Iran - In contrast to a lingering slump in the airline industry elsewhere around the globe, business and leisure travel in the Middle East and South Asia has surged, heating up regional competition and spurring multibillion-dollar expansions by Persian Gulf carriers and airports. At stake is a transport locus to rival Singapore, with a chance to grab more of the business on lucrative international routes from large Western and Asian carriers. "There's explosive growth in the region," said Jim Smith, editor of Jane's Transport Finance magazine. The Middle East accounts now for only about 5 percent of the world air transport market, and most of its airlines - including Saudi Arabian Airlines - are clunky, poorly managed operations controlled by the state. Even Emirates Airline, the region's most profitable and ambitious as well as one of the few managed according to Western standards, flew less than a sixth of the revenue passenger kilometers of American Airlines in 2002, ranking 24th in the world, according to Air Transport World, a trade magazine. Revenue passenger kilometers is a measure of sales volume. And though the carriers have relatively low prices and luxury services - including some innovative amenities like onboard nannies and individual television screens in cabin class - experts say they will have a hard time changing Western travel habits. "A lot of people vote ethnically when they choose their airline," said J. A. Donoghue, editorial director of Air Transport World. Nonetheless, industry analysts agree that the Middle East has been shaking off the effects of the war in Iraq and is now the world's hottest air transport market, fueled by growth in the Indian subcontinent and across the Mideast. In the year that ended in November, passenger traffic in the region grew 5.4 percent, compared with a worldwide traffic increase of 2.1 percent. Plane takeoffs and landings grew 10.3 percent, compared with a worldwide decline of 0.6 percent, according to Airports Council International, a trade association based in Geneva. Planes are about as full as the global average of 77 percent, according to the International Air Transport Association. Emirates Airline, which is government controlled and based in Dubai, has been flying since 1985 and has been leading the expansion drive. In the last year, it has signed contracts to add 109 planes worth $26 billion to its current fleet of 51 planes. The orders include 45 A380-800's, the huge, long-haul planes that Airbus of France is set to introduce in 2006. The carrier plans to add six destinations this year, including nonstop flights to Shanghai, Glasgow and New York. The New York flight represents the first nonstop between the Mideast and North America. Qatar Airways, which is also growing fast, has announced a plan to buy two A380-800's, part of a $5.1 billion, 34-plane purchase from Airbus to expand its fleet to 56 by 2008. It also plans to increase the number of destinations this year by more than a quarter. The decade-old airline, owned by Qatar, its royal family and the Qatar Insurance Company, also plans to increase its number of destinations from the current 48 worldwide to 60, including Zurich and Istanbul, by year-end. Qatar's government also signed a $2.5 billion deal with the Bechtel Group to build a new airport in Doha, the first part of a plan to increase the annual passenger capacity to 60 million by 2020 from 4.6 million now. The long-ailing Gulf Air, based in Bahrain and owned by the kingdoms of Bahrain and Oman and the United Arab Emirates, says it has cut its losses and plans to add three planes this year, aiming to nearly double its fleet to 60 by 2009. The 50-year-old airline's current fleet flies to more than 45 cities in 34 countries. Several new airlines have also popped up, including Air Arabia, a no-frills line based in the emirate of Sharjah, and the upscale Etihad Airlines of Abu Dhabi. Even Iran, which is under heavy United States sanctions and unable to compete with the region's sleek carriers, has begun ramping up air capacity with its new $475 million Imam Khomeini International Airport just south of Tehran. "Iran used to be the heart of the Silk Road," President Mohammad Khatami said at the ribbon-cutting in February, according to state media. "Now it can again connect east to west and north to south." Among some airline industry experts, there is an undercurrent of skepticism about the gulf's ability to absorb so much air capacity. "Everyone is always amazed at the ambition of Emirates' expansion plans," said Sandy Morris, an aerospace analyst based in London for ABN Amro, the Dutch investment bank. "It's a sort of endless debate as to how it's able to do it and whether it makes sense." Michael Simon, the airline's spokesman, said, "Passenger traffic in the Middle East is growing at approximately 20 percent every year, which is a large enough cake for all to share." But even some officials of the growing airlines marvel at the rate of expansion. James Hogan, the Australian whom Gulf Air brought in as chief executive two years ago, said there would be a day of reckoning for the industry. "There's going to be some need for consolidation somewhere down the line," said Mr. Hogan, a veteran of Qantas and the failed Ansett Airlines in Australia. For now, though, most industry experts tend to side with the optimists. The number of passengers flying Emirates Airline has been growing about 30 percent a year, Mr. Morris of ABN Amro said. The airline is even nibbling into the Australia-England route, dominated by major carriers like Qantas and British Airways, he said. "No one can yet fly Sydney to London nonstop," Mr. Donoghue of Air Transport World said. "It doesn't make a difference if you stop off in Singapore, Hong Kong or Dubai." Emirates Airline is betting that the future of the industry will be big planes stuffed with moderate-income passengers making long flights between East and West, hence its rush to order the huge new Airbus planes. Those double-decker A380-800's will be able to carry a maximum of 840 passengers over 10,000 miles without refueling, compared with a maximum of 525 passengers over 8,000 miles for Boeing's 747-400, now the biggest civil aviation plane. About 18 million travelers passed through Dubai's airport last year. While it still trails Changi Airport in Singapore, with its 24.7 million travelers, the passenger numbers are a sign of Dubai's emerging position as the Mideast's transport center. Travelers spent a record $380 million in the Dubai airport's mall-like duty-free complex, up 24 percent from the previous year. In addition to offering passengers duty-free goods, the hubs attract corporations considering regional offices. "Dubai's future equals Emirates' future," Mr. Simon, the Emirates Airline spokesman, said. "We have a stake in its success. It has a stake in ours." The airline reported cash reserves of more than $1 billion, which Mr. Donoghue said was healthy for an airline the size of Emirates. Its March 31, 2003, annual report, the latest available, reported a 74 percent increase in net profits. According to Mr. Smith of Jane's Transport Finance, many of the gulf's airlines and airports are in good enough financial shape to persuade financers like Crédit Agricole Indosuez of France, the HSBC Holdings of London and Bank of America to bankroll expansions. "Look at the names of the banks that are financing those aircraft," he said. "The people making these decisions are not stupid." http://www.nytimes.com/2004/04/13/business/worldbusiness/13gulf.html?ex=1082861380&ei=1&en=6aea1b6e015e79a1 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! 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