Gulf Carriers Rebuild, Nearing Crucial Fleet Decisions

Etihad airliner
Etihad plans to focus on the Boeing 787 and Airbus A350 for long-haul flying.
Credit: Etihad

For Emirates, the Dubai Airshow has always been the stage to present its big ambitions. It has routinely announced its aircraft orders there, including a staggering commitment for 150 Boeing 777Xs and 50 more Airbus A380s at the 2013 show. But eight years and one pandemic later, orders of the same scale are highly unlikely as Emirates and its peers adjust to the new realities.

Coming out of the novel coronavirus pandemic, the airline landscape in the Gulf has changed. In the early phase of the pandemic, Emirates was essentially grounded for several months and has since slowly built back an operation that is still far below 2019 levels. Its primary rival in the region, Qatar Airways, has used the crisis as an opportunity to build its share of the remaining air transport market—-Qatar Airways ranked ahead of Emirates in seat capacity during some periods in 2020 and 2021. Only recently has Emirates built back to the leading position, reclaiming its place as the largest international airline globally, followed by Ryanair and Qatar, according to CAPA – Centre for Aviation data for the last week of October. Etihad Airways, once equally ambitious, scaled back long ago and is now less than a quarter of Emirates’ current size.

  • Emirates demands clarity on Boeing 787, 777X timelines
  • Qatar Airways ponders A350f, 777XF orders
  • Etihad progresses on fleet streamlining

As Dubai wants to position this year’s show, taking place Nov. 14-18, as the first big event of its kind after the pandemic, Emirates is also keen to demonstrate that its recovery from the dark days of 2020 is well underway. “Demand for air travel will restore itself sooner rather than later,” Emirates Airline President Tim Clark asserts. Since travel restrictions have eased in some key markets, “bookings have gone exponential,” he notes. “There is a lot of pent-up demand, and it is now coming back.”

The airline’s loss for  fiscal 2021-22, ending March 31, will be smaller than it was in fiscal 2020-21, according to Clark. Emirates Group recorded a $6 billion loss in the 2020-21 financial year and received $3.1 billion in equity from the government of Dubai to cope with the fallout of the pandemic. Clark believes the company will return to profitability in the second half of the 2022-23 financial year. The International Air Transport Association forecasts that the industry as a whole will return to profit in 2023.

“We have been prudently restoring our operations in line with the borders reopening and [easing] of travel protocols, and with the positive signs in the economic recovery and continuous growth of demand, we are hopeful to be back to where we were pre-pandemic, from mid-2022,” Emirates Group Chairman and CEO Sheikh Ahmed bin Saeed Al Maktoum says. The airline is hiring 2,500 additional staff on top of 3,500 more announced in September over the next six months to cope with the added workload. Among the 2,500 are 700 pilots—and management hopes it can hire back many more pilots who have been laid off since early 2020.

Emirates is flying all of its 145 Boeing 777-300ERs again and is bringing back more A380s. By the end of November, the airline will fly the A380 to 27 destinations, up from 18 currently. By year-end, the company aims to have 50 A380s back in service. The last two A380s on order are scheduled to be delivered in December. In terms of overall capacity, the company aims to reach 70% of pre-crisis levels by the end of the year and will “restore the network by the middle of next year,” Clark says.

So much for the near term. Longer-term, Emirates is still looking to change in its fleet structure significantly. In 2019, it opted not to take more A380s, ordering 50 A350-900s instead. The airline also reduced the initial commitment for 150 777Xs to 115 units while taking 30 787-9s as well. It is moving from a fleet of two high- or very-high-capacity types to four and a smaller average aircraft size.

There has been a lot of speculation about Emirates possibly reducing its 777X order further. Because of the program’s many delays, Emirates is likely contractually entitled to walk away from earlier commitments anyway, and Clark has been vocal in his criticism of Boeing’s lack of transparency about the 777X timeline.

“We have to have a grown-up discussion about timeline,” Clark says. “We have to deal with it fairly quickly, as we need to know when these aircraft are coming in.” He was unsure as to whether the talks could be concluded before the Dubai Airshow.

The much-delayed 777X is now tentatively scheduled to be delivered at the end of 2023. The Aviation Week Network Fleet Discovery database estimates the first 777-9 will be delivered to Emirates in the second quarter of 2024 and the first of 16 777-8s in the first quarter of 2015. But Clark says he does not even know “whether the -8 is going to be built,” adding: “And I’m not sure what is going on with the 787 either-—they have not been delivering them for months.” Emirates is due to receive the first 787 in the second quarter of 2024, according to Fleet Discovery data.

Emirates Boeing 777-300ER
Emirates has returned all of its Boeing 777-300ERs to service and wants clarity on upcoming 777X deliveries. Credit: Airbus

The 777X timing could trigger shifts in the orderbook and for deliveries. Emirates is also expecting its first A350-900 in the middle of 2023 and has been told by Airbus that the schedule is secure.

Fleet discussions are imminent at Qatar Airways, too. The airline continues to keep 16 of its A350s grounded, based on an advisory by the Qatar Civil Aviation Authority (QCAA) regarding alleged quality issues with the fuselage surface, an assertion that Airbus largely rejects. The European Union Aviation Safety Agency (EASA) has said it has no concerns regarding airworthiness and has recommended normal inspections. At the same time, Qatar CEO Akbar Al Baker has expressed his interest in becoming the first customer for the freighter version of either the A350 or the 777X, both of which are close to being launched, possibly at the Dubai Airshow.

While Al Baker had said earlier that the airline would not continue to operate its 10 A380s, the carrier is now returning some of them to service to backfill capacity needs created by grounding of the 16 A350s.

Qatar already has major aircraft orders in place from pre-pandemic times: It bought 60 777Xs and has 23 outstanding deliveries for 787-9s. On the Airbus side, it has commitments for 50 A321neos and 23 more A350-1000s. According to the Fleet Discovery database, the next A350-1000 is due for delivery in the third quarter of 2022. The airline is scheduled to receive its first A321neo in the second quarter of next year.

Like Emirates, the carrier has to deal with considerable delivery schedule uncertainty. Qatar is scheduled to receive its next 787-9 in early 2022 and the first 777-9 at the beginning of 2024, according to Fleet Discovery data.

The airline started 2021 at more than 50% of 2019 seat capacity and has slowly grown to around two-thirds of pre-crisis weekly seats offered, according to CAPA statistics. CAPA predicts Qatar Airways will reach around 75% of pre-pandemic capacity by year-end.

In 2020, the carrier’s strategy differed markedly from that of its competitors. It had cut back massively in the early phase of the pandemic, then added back a lot of capacity over the early summer, which it then reduced sharply—only to build it back up steadily starting in July 2020.

Qatar also has a particular strength in its cargo business and is now the biggest airline in terms of international freight capacity. Cargo traffic continued to grow substantially through the pandemic.

Still, the 2020-21 financial year (ended March 2021) has been a very challenging for Qatar Airways. The airline posted a $4.1 billion net loss, including a $2.3 billion charge related to the grounding of the A330 and A380 fleets. The number of passengers carried dropped to just 5.8 million from 32 million in 2019-20, though it kept capacity overall much higher, at 39% of pre-crisis levels. Around 13,000 of 50,000 jobs at the airline were cut.

In the future and as demand comes back, Qatar Airways will have fewer regulatory restrictions for growth into Europe. The European Union and Qatar signed a comprehensive air transport agreement on Oct. 16, a deal they initially agreed on four years ago. Under the agreement, EU airlines will be able to operate direct flights from any airport in the EU to Qatar, and Qatar Airways will have access to all European airports.

However, the potential for Qatar to increase flights to Europe is much greater than the potential for European airlines to operate to Qatar. OAG data shows that while Qatar Airways operated 726,917 seats to Qatar from European countries (as defined by IATA’s regional categories) in November 2019, British Airways operated just 5,616, Turkish Airlines 5,348 and Turkey-based Pegasus Airlines 7,752 seats to Qatar during the same period.

“We are very glad that the European Union and its member states have continued to recognize and understand the value our aviation agreement brings to their economies,” Al Baker says. However, reactions among European airlines have been mixed, with some voicing skepticism about the benefits to the region’s aviation sector, given the much greater market potential for Qatar Airways to expand services to Europe than for Europeans to gain market share from flights in the opposite direction. Air France-KLM says it “regretted” the agreement, which it expects will intensify competition for airlines still feeling the impact of COVID-19. Lufthansa Group states: “It is now important that the agreements on fair competition contained in the agreement are also applied.”

While Europeans see Emirates as a continuing threat and Qatar as a growing one, the role of Abu Dhabi--based Etihad has changed. The airline long ago abandoned its ambitious growth and partnership strategy and cut back radically, for now turning to a boutique and more niche airline focus. Still, Boeing and Airbus have sizable widebody exposure, as Etihad still has 15 A350-100s, 25 777Xs and 32 787s on firm order, according to the manufacturers. Etihad plans to phase out its 777-300ERs by year-end, and CEO Tony Douglas said earlier this year that its fleet planning is centered on the A350 and the 787, raising questions about its intentions for 777X. The A380s have been grounded since the beginning of the pandemic and are highly unlikely to return to service.

Jens Flottau

Based in Frankfurt, Germany, Jens is executive editor and leads Aviation Week Network’s global team of journalists covering commercial aviation.