Podcast: How Middle Eastern Airlines And Airports Are Evolving

Listen in as editors share what was on the mind of CEOs at Routes World 2024 in Bahrain.

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Rush Transcript

Karen Walker:

Hello everyone and thank you for joining us for Window Seat, our Aviation Week Air Transport Podcast. I'm ATW and Aviation Week Network Air Transport Editor-in-Chief, Karen Walker. Delighted to welcome you on board. So, this week, I'm joined by two colleagues, David Casey, the Editor-in-Chief at Routes, and Victoria Moores, Europe and Africa Bureau chief at ATW. Great to be with you both. Now, Victoria, David, you've just returned from Bahrain where our Routes World event was held. Routes is our organization that focuses on connecting and informing the world's airports and airline networking communities. They hold regular regional events around the world as well as the largest of them all, Routes World, which as I say this year was hosted by Bahrain.

David, I'm going to start with you. I know that there was some concern in the build-up to this event about attendance and how the event would happen relative to the events going on in Israel, Lebanon and Gaza, the wars there. While they are pretty far away from Bahrain, war is war and people, of course, have concerns. However, for Routes World, it seems like it was a very successful event judging by the attendance and the quality of the conference program. So you were there, give us some highlights, please.

David Casey:

Karen, as you say, the turnout in Bahrain was fantastic. I think we had over 2,300 delegates, so that puts it on a par with recent Routes World events in Las Vegas and Guangzhou. So really strong turnout. I think there were 225 airlines in attendance and 110 countries were represented. So it really was a global event. I suppose in terms of personal highlights, one for me was having the opportunity to interview Tony Douglas on stage. So he's, of course, the CEO of the new Saudi Arabian carrier, Riyadh Air. So I know you know Tony, he's an industry veteran. He's been around. He led the turnaround for Etihad, but he's got a wealth of airport experience as well at Abu Dhabi and at London Heathrow. So it's really interesting to hear his insights on stage about the process of launching Riyadh Air and how he plans to leverage some of his experience to shape that airline's future.

He actually also hails from a town very close to where I was born, so nice to reminisce a little about that and about the cold northern weather while we were in the 100-degree heat of Bahrain. One of the highlights, actually ... A quick highlight for me actually happened on the flight home back to the UK from Bahrain. And that wasn't just because of lack of sleep and I was desperate to get home to catch up on sleep after a busy week. I actually got a message from someone sharing news about a new route that was about to be launched the next day and the initial discussions for that route started at a previous Routes event.

Now, it's not unusual to hear stories like that, but I think it just reinforced how impactful these events are in shaping airline networks. And it also helps to make the effort that goes into organizing the events really worthwhile when you see the tangible results. So, that was really pleasing as well. For anyone interested, it was Houston to Puerto Escondido in Mexico, which United will be flying from next April, though Puerto Escondido's first international route as well. I hope I pronounced that right.

Karen Walker:

You heard it first from Window Seat. Victoria, you've covered lots of these Routes events, and so what was your key thoughts as you went to this one in Bahrain?

Victoria Moores:

Yeah, I think that David's just actually triggered something for me and that was that up on stage there was one airline, which was TAP Portugal, and they were specifically talking about another Latin American route to Brazil, and they said that that route had been in the planning for three years and that came to fruition as a result, again, of the discussions at the Routes events. And I think that there's always that sense of community in the network development crew that show up to these Routes events. And I think that that's very, very important, the personal element of network planning and working in aviation in general. And I don't think that I picked up on much of a sense of people being concerned about the events in the Middle East, particularly in terms of the location being Bahrain.

It felt as though it was very much business as normal, discussions as normal. And I think for me that there were two themes coming out of the content that I was reporting on and also moderating during the conference. One of them was region-specific. I think we heard some interesting things from the Gulf carriers. And then the other one was broader industry perspectives. So that's on sustainability, network development, business models. So those were the two key themes that I heard coming out of the event. Perhaps we can go into those further.

Karen Walker:

Absolutely, yes. So let's pick up on the Gulf area, first and foremost. I mean, yes, this was a global event. There were people from all of the regions, but as we've said, this was being held in Bahrain and there was a lot of interesting things coming out from carriers there, not least Riyadh Air, which hasn't even started operations yet, but everybody's got their eye on them in Saudi. So let's just talk a little bit first about that. It does seem to me that what we're seeing is the continued resilience of airlines. And it's obviously not just in the Middle East; we've still got the war in Ukraine. That is disrupting some air routes. But airlines are very good at working around these things, working out how to make up for this and keep going. They're now starting planning of the winter schedules coming up. And David, what was the conversation there and what was the feeling there? Also on airports, this is an area where there's a lot of investment going on to grow airports.

David Casey:

I think one thing that we did see was the sheer ambition of this region. I think we heard from ACI-International’s new director general; he was talking about traffic levels. So I think traffic in the Middle East this year will be about 10% higher than 2019, about 450 million passengers. And that's despite all the geopolitical tensions that we're seeing. And he said it's going to accelerate further in the coming years. And in terms of those airport investments in Bahrain, for example, there was a new terminal that opened in 2021, which is essentially creating a new airport that's capable of handling 40 million passengers a year. And there are ambitions to grow connectivity from about 60 destinations now to 100 destinations within the next few years. But the ambitions don't stop there. In Bahrain, they're already evaluating construction of a new greenfield airport, which would cost about $10 billion US dollars.

And as you said, in neighboring Saudi Arabia, there is so much development going on. I know we've spoken in the podcast before about the Saudi Vision 2030, which seeks to diversify the economy. So I think that they're looking for tourism to generate about 10% of GDP by 2030 and attract about 300 million air passengers. But as part of that, there's huge airport infrastructure investment. So there's a big delegation at Routes World from Riyadh's King Salman International Airport. So that's a six-runway airport project that's going to be or expects to be the world's largest when it opens in 2030. There's also expansions in Jeddah and Neom Bay in Saudi Arabia, and if you look at the United Arab Emirates as well, there's going to be huge investment in Dubai's Al Maktoum International Airport, which I think they're looking to increase capacity there. It's about 260 million passengers annually. So, huge sums of money, huge investments and huge growth potential in this region. And that was one of the things that really stood out for me.

Karen Walker:

And Bahrain, David, was the host, that's one of the smaller nations in that region, but it also has its own growth ambitions in aviation, yes?

David Casey:

Absolutely. Yes. So we heard from Jeffrey Goh, the CEO of Gulf Air, and he's talking a little bit about how the airline is restructuring at the moment. So they're focusing their network more to generate inbound tourism. So similar to what's happening in Saudi Arabia, looking to diversify the economy more towards tourism. So as I said, I mean, the airport ambitions are huge; 40 million passengers the airport can handle at the minute, but they are already looking at expanding that and building a new airport. So it'd be exciting to see what happens in that market in the coming years now we've had this event and all the network planners and aviation leaders have been to Bahrain and visited it for themselves.

Karen Walker:

Victoria, you were just also, like David, you were very recently at the Farnborough Airshow, too, and I thought it was quite interesting that there was quite a strong presence from the airlines from this region there. As we all know, Victoria, in general, the airlines were a smaller presence at Farnborough than we'd typically expect, but there were a lot of the Gulf and Middle East carriers there. Particularly what's interesting is the low cost carrier scene there, correct?

Victoria Moores:

Yeah, absolutely. I think that what I was noticing is a bit of a two-speed approach from what we were hearing from this region. So, in days gone by, we've heard of this massive Gulf airline expansion acceleration, and one of the presentations that really stood out to me was the one from Etihad. Of course, historically they went around acquiring stakes in a lot of airlines. They went through a revamp from 2017 onwards, really consolidating and focusing in on their core business. And it was really interesting to hear how they're going to hit 2017 levels next year. That's what they're expecting as they progressively built back up their operation, but in a very different way. So, it's that idea of the airlines that have historically grown very quickly are rechecking their growth and finding their feet. Same thing what I heard from Gulf Air, and that's where Jeffrey Goh, David already mentioned, his presentation at the event—he was talking about how they're restructuring their network, how they're going to be looking to make cuts, how they have to be very robustly addressing Gulf Air's financial performance. So, there is that real focus in on the core business from some of the players that historically have been quite aggressive in their expansion.

But the flip side of this, whereas Riyadh Air, obviously we heard quite a lot about their ambitions. They need to place a narrowbody order. They're planning on bringing in the narrowbodies after about a year of operation. They're looking to serve 100 destinations within five years. At the same time, we had flyadeal talking at the event, and they were talking about how they're going to begin bringing in more widebodies. At the moment, they only have one. They're really looking to push out their expansion. A notable thing that I heard there was, while Europe is on their list of network evaluations and probably some of their expansion will be to Europe, they said they see Europe as being very aviation unfriendly because of the regulations, the taxation. And I think that that was quite noticeable, was the fact that Europe doesn't seem like quite such an attractive target anymore for the network development. I'm curious whether David got that kind of sense, as well.

Karen Walker:

That's interesting, Victoria. David, what's your take on this idea that Europe isn't as interesting anymore because it's a more difficult environment?

David Casey:

Yeah, absolutely. I agree with Victoria. I think we heard as well from Air Arabia CEO Adel Ali, and he was talking about their network and it seems that Europe doesn't seem to be a focus. They're focused more on the North African market in the Middle East, obviously, their bread and butter, and also expanding further into Asia.

Karen Walker:

Just a shift into one different area here. I heard this being raised several times from the conference program is that for everything else that's going on, wars, taxes, sustainability issues, etc., it seemed to me still that the biggest problem facing these airlines and probably airlines everywhere is the ongoing supply chain issues, the shortage of engines and aircraft and parts for those engines and aircraft, the whole thing. That still seemed to come across from a lot of the CEOs that we're talking, that that's their biggest problem. David, would you agree with that?

David Casey:

Absolutely. If airspace is closed, it's going to add time and cost to the flight, but airlines can usually navigate around it so service continues, but obviously it isn't possible to maintain or grow service if carriers can't get the capacity they need. And I think that was a reoccurring theme throughout the conference and we heard a number of speakers touch on it. Jeffrey Goh, I think, said that his airline, Gulf Air, planned a 14% increase in passenger numbers this year, but delivery delays and maintenance issues have forced them to revise that target downwards to about 8% to 10% increase.

And he actually said there's, I think, 700 aircraft globally that are grounded because of engine issues and he doesn't expect that situation to improve for maybe two or three years. We did hear it as well from Tony Douglas. He didn't elaborate too much, but he said delays were, I quote, "an ever-present threat," and he said that Riyadh Air's plans have already been revised three times. As he pointed out, the carrier doesn't have a Plan B. it doesn't have a single aircraft yet. It's not taken any leases, though unless it gets those 787-9s that it's ordered from Boeing, it just can't launch operations, though—that is a real threat. That is a real challenge that Riyadh Air is facing at the minute.

Karen Walker:

Right? And of course we all know Boeing's problems continue. So that's really the thing that we're going to be watching rest of this year and well into next year, I suspect, and certainly the airlines. Victoria, any last thoughts, again, maybe on the supply chain side?

Victoria Moores:

Yeah, absolutely, Karen. Similar to what David just said, we heard from Air Arabia chief executive Adel Ali, and he was saying that they chose to delay some of their aircraft because they wanted to wait until the LEAP engine issues were ... that a fix had come through. And they said that they're now not expecting their first aircraft from their neo order to come until next year now. And so it really is that element of airlines want that operational stability. And that was another theme that came out of a different panel, was that when airlines are evaluating which routes to operate, we were told that the key thing that they're really looking for is the overall operating costs. They need to have that visibility and that extends into all kinds of areas of the operation, I imagine, including aircraft supply, including ground handling costs, including turnaround times, including slot availability. So there really was a talk about the complexity of the thinking that goes into deciding to launch routes and also maintaining that stable operation as an airline.

Karen Walker:

Yeah, absolutely. So I mean, essentially, there's a lot of thought and planning goes into this network side of airline operations, planning your network, your frequency, where you're going, new routes, expanding existing routes, but if you then don't end up with the aircraft or engines that you are anticipating, it really, really blows a big hole into that. Definitely, we'll be hearing more about that, like I say, this year and well into next year. David, before we sign off, we do have a couple of more Routes affiliated events this year. Just tell us briefly about those.

David Casey:

Yeah, that's right, Karen. We've got TakeOff North America, which is taking place in Green Bay, Wisconsin, and that's from the 22nd to the 24th of October. And that's an event specifically designed for the domestic air service development in North America. And later on in the year, there'll be GAD World. So that's an event for airport operators and investors, which will be in Munich, Germany, from the 11th to the 13th of December. But there's no more Routes events this year, but there will be Routes regional events, which start again in the first quarter of 2025. So there's Routes America in Bahamas, in February, Routes Asia in Perth, Australia, in March, and Routes Europe in Seville, in April. So it's going to be a busy start to the year, but look out for coverage on aviation recent routes online and we'll be reporting from all those events there.

Karen Walker:

Absolutely. We'll be there. And then I think we end with Routes World in Hong Kong in the fall next year. So that will be the next big one. So David, Victoria, thank you again so much. It was really great hearing your coverage from the event, and it was very nice to see that Bahrain hosted a really good Routes World. So thank you again also for your time today, and thank you to our producers, Guy Ferneyhough and Cory Hitt. And of course a huge thank you to our listeners for following Window Seat. Make sure you don't miss us each week by subscribing to the Window Seat podcast on Apple Podcasts or wherever you choose to listen. This is Karen Walker signing off from Window seat.