Middle East Airlines Just Keep Spending

Most airlines are too financially strapped these days to consider splashing out billions on new planes. But Middle Eastern airlines are not like most others.

In separate deals announced on July 14 at the Farnborough airshow, Saudi Arabian Airlines, Abu Dhabi’s Etihad, and Emirates startup FlyDubai announced a jaw-dropping $23 billion in new orders from Airbus and Boeing. Qatar Airways is expected to seal a deal this week that could add billions more to the tally.

All this, after Middle Eastern carriers ordered more than 400 big jets in 2007. By contrast, U.S. airlines ordered a total of about 200 planes last year.

Money is clearly no object for these guys. But where exactly are they heading? You had to wonder when FlyDubai’s top managers, in response to questions at a Farnborough press conference, said they didn’t know yet what destinations they would serve or how their $4 billion aircraft order would be financed. “We are developing plans,” FlyDubai Chief Executive Ghaith al Ghaith said.

Not that there’s any question about the Dubai government’s having $4 billion to spend – but most startups at least have a route map in mind before they buy their fleet.

Etihad’s goals are a bit clearer. As flag carrier for the United Arab Emirates, it wants to create a global airline hub in Abu Dhabi to jump-start growth and tourism there – just as neighboring Dubai has done with its own airline Emirates. But can the region really support two hubs less than 100 miles apart?

For now, there seems no limit to the ambitions of these fast-growing airlines. And Emirates, the biggest of the bunch, so far has confounded skeptics by operating profitably even as it adds an average of almost 1,000 passenger seats to its fleet every month.

Impressive, but how long can it continue?

http://www.businessweek.com/globalbiz/blog/europeinsight/archives/2008/07/middle_east_air.html

 

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