Thank you for flying with us – we know you have a choice…

I love flying, and equally I love observing the minutiae of the airline industry – branding, marketing messages, the customer experience, and the way that power has shifted within the industry over the past few years.

A couple of weeks ago, Emirates, the Dubai-owned airline with more planes per head of its citizen population than any other, announced it was ordering another thirty six Airbus 380s to its existing fleet. The A380 is the plane in which you can practice your golf short game in comfort, or, if you’re more commercially minded, accommodate up to a thousand passengers. Oh, and in addition to the new A380s, it also has 48 more Airbus 380s, 70 Airbus 350s, 18 Boeing 777-300s and 7 Boeing air freighters on order, according to arabianbusiness.com. The number of Emirati citizens in Dubai is approximately 180,000.

Emirates, and its closest competitors, Qatar and Etihad, are the planemaker’s dream. If it were not for orders from the Middle East and Asia, Boeing, Airbus and the smaller aircraft manufacturers would be in deep trouble today.

Meanwhile, back in the old world, British Airways struggles on, strike-ridden and hidebound by its massive pension deficit. The world’s favourite airline? Sadly, not today, I think. Things aren’t much better on the low-cost front. Given half a chance, Ryanair would charge us for the air we breathe in their cabins. In the US – no longer the new world in economic terms – only four years ago half the US-owned planes in the sky were owned by airlines in Chapter 11 bankruptcy, and you can see the paint peeling from the airframes of some of the major airlines.

Emirates is effectively owned by the government of Dubai. Its expansion is no accidental reflection of grandiose ambition on the part of the country’s rulers. The national airline is part of the same strategy that led to mile-high towers, shopping malls and hotels in an Emirate known mainly for its pearl fishing and trading dhows as little as thirty years ago. All this is known and extensively written about in the world’s media, and I have no wisdom to add on the subject.

But what’s interesting to me, as a frequent flyer, is the contrast between the attitudes to aviation in the Middle East, and those in the west. In a number of respects there have been some telling reversals of values over the past twenty years.

In the USA, airlines have always been privately owned. Since deregulation, more of the big names – Pan Am, Eastern and others – have sunk than have survived. The European flag carriers have largely been privatized. But they have struggled, in large part because national and European Union legislation has protected the rights of airline employees who enjoyed very generous salaries and benefits under state control. Some of the former “flag carriers” have gone under – Alitalia, Swissair and Sabena among them. Others, such as British Airways and Iberia, either have merged or are seeking to do so as a means of reducing costs and expanding their global reach.

So in most of the old economies, the concept of the national flag carrier, the embodiment of national pride, has withered and died. Few in the UK would say today that British Airways epitomizes its home country. Though observers from other countries might say that it absolutely does – strikes, condescending staff, chaos at the Heathrow Terminal Five opening and all!

But in the Middle East, airlines like Emirates are instruments of a national policy to divert traffic to tourist hotspots on their way between the Asia Pacific region, Europe and the USA, and to establish the Gulf states as business hubs that straddle the time zones between east and west. This is a serious threat to some of the other airlines who traditionally stop off at Heathrow, Schipol or Frankfurt.

Emirates, Etihad and Qatar Airlines also serve the other purpose of flag carriers, in that they project the image of the home country that their owners would like us to form. You don’t hear the CEO of Etihad boasting like Michael O’Leary about plans to charge the customers for use of the toilets on Ryanair flights. On a Qatar Airways flight, if you want a stiff drink, someone will serve you from a bottle. Whereas on British Airways, you will be given a miniature, unscrewed because, you might think, you can’t be trusted not to stockpile for your holiday. The Middle East airlines go out of their way to promote their customer service, and usually deliver.

Private ownership good, state ownership bad? The owners of the Middle East flag carriers might argue otherwise. True, they have advantages. Unfettered by legacy fleets, staff costs and diversity legislation which prevents them from retiring cabin crew when they reach a certain age, these airlines have the benefit of massive start-up capital, can present a youthful image to their customers and are able to build their businesses from the ground up according to today’s economic realities. As state-owned enterprises, they are also part of a bigger picture – the national interests of the countries they represent. If you asked Sheikh Mohammed of Dubai whether it was more important for Emirates to make a profit than to continue to drive traffic through Dubai and help the country recover from its recent financial difficulties, I have a good idea what his response would be. As it happens, Emirates is profitable, but for its owners, shareholder value is far greater than black figures at the bottom of the balance sheet.

In contrast, poor old British Airways delivers little benefit to the country of its origin, and little more than grief to its beleaguered shareholders and to staff who through no fault of their own find themselves fighting a losing battle to hold on to their legacy perks and packages. And Ryanair continue to delight in upsetting their customers with a counterintuitive glee, calculating that we will forgive them for their crassness because they give us the opportunity to spend more money on Barolo in Tuscany.

Is the current airline boom in the Middle East sustainable? Probably not. There are a lot of seats to fill. A colleague who arrived in Bahrain the other day on one of the boom airlines travelled on a near empty flight.

Elsewhere in the region, Gulf Air is going through a painful retrenchment as it scales down to become a regional carrier. One of the pioneer airlines in the Gulf, it used to be owned by several of the Gulf states. Since its shareholders in the UAE, Qatar and Oman divested their interest in the company, Gulf Air has struggled, even though I find them a pleasure to fly.

But for all the ups and downs in the airline industry, there’s little to match that feeling of raw power as the engines throttle up at the beginning of the runway. It’s just a shame that these days I’ve usually fallen asleep by then.

Steve Royston
June 2010