Thurs, August 20 at 11am ET / 8am PTSponsored By: American Express Global Business Travel
Mon, August 24 at 11am ET / 8am PTSponsored By: TripActions
Thurs August 6, at 1:00 PM ETSponsored by: Cvent
Virtual Event - September 9-10, 2020
Convene: 225 Liberty Street - October 22-23, 2020
Filter in or out as many as 200 cities, as well as hotel and car rental class and meals of the day and watch as the per-diem calculator automatically adjusts per diems to your program. Drill down into cost breakdowns and export the results.
Amid an escalating war of words with their more
established rivals, fast-growing Gulf carriers Emirates, Qatar Airways and
Etihad are starting to pick up corporate business. Their burgeoning success stems
from the intensifying strength of their international networks, growing demand to
non-Western destinations, lower fares than carriers offering direct services and
their role as a source of competition in a fast-consolidating aviation market,
according to travel professionals speaking with BTN. However, skeptics said they believe that airlines offering a
long-haul, hub-and-spoke model have only limited appeal to corporate travelers.
The acrimony between the Gulf carriers and their competitors representing
the three major global airline alliances reached new heights last week when both
Emirates and Qatar Airways published ripostes to remarks by Association of
European Airlines secretary-general Ulrich Schulte-Strathaus. During a January
speech in Washington, D.C., Schulte-Strathaus expressed concerns that the big
Gulf carriers "are owned by their respective governments and operated as
an instrument of national strategy (if 'national' is the right word within this
regional rivalry), and they are integrated vertically across commerce, tourism
and foreign policy. ... These three airlines have more widebody seats on order
than the entire U.S. industry has in its current fleet: 425 brand new long-haul
aircraft in the next five years." Emirates, for example, is building a
fleet of more than 90 Airbus A380s.
Concluding that the Gulf carriers have "collectively commit[ted] $100
billion to transforming the aviation map of the world," Schulte-Strathaus
called for regulation to prevent competitive distortions. "In the short term,"
he said, "the answer could be to ask governments to prevent additional
Emirates and Qatar responded by accusing
airlines on both side of the Atlantic of such anticompetitive behavior as using
various forms of state assistance and lobbying governments to deny the Gulf
carriers' expansion. Key examples during the past year have included Emirates'
inability to secure flying rights between Dubai and either Berlin or Stuttgart,
and denied permission for the carrier to add frequencies to Toronto beyond the
three weeklies it currently operates. A public affairs briefing released last
week by Emirates alleged that "governments—from Europe to Asia to North
America—regularly tell us that lobbying against Emirates and other Gulf
carriers by a select number of legacy competitors, often in a regional bloc of
carriers and almost always involving Air France and Lufthansa, is more
formidable than ever."
As Schulte-Strathaus pointed out in his Washington speech, Emirates now
flies more international passenger kilometers than any other airline. Emirates
responded by pointing out that "European (and some U.S.) carriers are
merging with and acquiring others to become the largest airlines in the world
by a considerable margin." Both Qatar Airways vice president for the
Americas Tony Hughes and HRG group commercial director Stewart Harvey told BTN that concerns about airline consolidation
has led to increased interest in Gulf carriers among corporate clients.
"Clients are beginning
to ask, 'What do I do if I have less choice?' " Harvey said.
In a separate interview, Hughes said that such concerns are "absolutely"
one reason why "Qatar Airways is being invited to the table now. It is
partly the fact that we are more relevant, and it is also that corporates are
having issues with the [newly forming airline] conglomerates. Three years ago,
although we were getting corporate business, we were an alternate that would be
used ad hoc. Now we are getting preferred contracts."
Emirates currently flies 151 aircraft to 111 destinations. Qatar Airways
flies 94 aircraft to 98 destinations and plans by 2013 to serve 120
destinations with 120 aircraft. According to Hughes, 85 percent of Qatar
Airways passengers at the carrier's hub in Doha are connecting passengers. Many
use Doha or another hub in the region because they cannot fly directly to their
destination. Qatar, for example, serves 12 destinations in India, while
Emirates now flies to numerous secondary cities in Europe, such as Newcastle or
Hamburg, where there had been limited or no long-haul services.
Similarly, Hughes said the Gulf carriers are flying to expanding markets
in the East for which there are few, if any, direct services from the Americas.
Qatar's top destinations for U.S.-based corporate clients are the Middle East,
India, eastern and southern Africa, Kuala Lumpur and Bangkok. From South
America, leading destinations are the Middle East, China, Japan, South Korea
and India. "Geographically, the Middle East is the crossroads between East
and West," said Hughes. "Where our timing has been superb is in the
growth of India and China."
HRG's Harvey also noted the emergence of those markets, which is pushing
up clients' average airfares by significant margins as an increasingly high
proportion of their travel becomes long-haul. "We are now talking about
some clients doing dozens of flights a day to Asia," said Harvey. "They
are beginning to think about their deals for next year and about whether to
switch to indirect flights. Sometimes, the price difference is no longer $100
but more often $600 to $700."
Travel Managers Weigh Service, Convenience
Despite of the increasing cost of flying to Asia, not everyone can see
themselves switching to services that rely on a Gulf hub, especially if they
are based in a city with sufficient direct services. "I don't think they
are a viable competitor for us," said Dave Clarke, global employee
services manager for London-based global risk management and
safety assurance company Lloyd's Register. "Our policy is, we use direct
Jörg Martin, owner of CTC Corporate Travel
Consulting in Germany, for similar reasons is skeptical about how attractive
Gulf carriers are for European corporations. "The European carriers can
fly to most destinations directly," he said. "If European travelers
do have to connect, they prefer to do it in London, Paris, Frankfurt or Vienna
because it is more comfortable than flying six to eight hours and then
transferring. If you are talking about saving €300, it isn't worth upsetting your
body clock by changing planes in the middle of the night."
However, the generally
excellent reputation for service that Gulf carriers have achieved also can be
considered, especially as older rivals struggle to catch up on investment after
a decade of financial struggles. The Gulf carriers "are presenting an
alternative for sure," said Yann Le Goff, sourcing director for indirect
material and service operations for beverage packaging company Sidel. "The
only problem sometimes is the connection time, but they certainly challenge
traditional carriers from a quality point of view. The Gulf airlines' service
Tom Stone, director of
the U.K.-based consultancy Sirius Management, agreed. "Travel managers
sometimes struggle to get travelers to try the Gulf carriers but their
magnificent airport structures certainly make things a lot easier," he
said. "They are working very hard to persuade clients to fly them instead
of point to point. The way they have burst into the marketplace has been a
breath of fresh air."