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 British Airways) 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 travelers 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 115 million people into and out of their hubs in the Gulf or Istanbul, compared with 50 million 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 Air France-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, puts it: "The LCCs ate European airlines' lunch; the Gulf carriers are coming to eat their dinner."
Lufthansa says its Frankfurt hub has lost nearly one-third of its market share on routes between Europe and Asia since 2005.
Now, America's airlines are beginning to feel the heat. Last 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.
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-privatized, it still enjoys strong support from the government, which has ordered the building of a massive new airport on Istanbul's outskirts, with about twice the capacity of Heathrow.
Allegations of unfair advantages explain only so much, however. For one thing, the West's legacy airlines have not lacked 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.
The four super-connectors are spending huge sums expanding their fleets with the latest, most efficient jets. Their staff is young and keen, and the airlines spend lavishly on marketing their in-flight service and widening range of destinations.
And now they are ramping up their services to North America. 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 10 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. 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.
Berating the new opponents for perceived injustices has 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.
Matters can only get worse for the legacy carriers. If Norwegian Air Shuttle, a low-cost carrier, 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 travelers, however, the age of cheap flying is set to go on and on.
Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.
