Covid-19 is affecting many airlines, but Gulf carrier Emirates Airlines (EK) is suffering most because of its large A380 fleet that cannot be operated profitably due to lacking market
demand. Side-lining a great number of the double-deckers, thus dwarfing itself, or merging with neighboring Etihad are two options currently on the agenda.
The concerns of its Gulf peers are good news for rivaling Qatar Airways, given its fleet advantages.
British Airways, Air France-KLM, Lufthansa, Singapore Airlines, and others have either already completely phased-out their A380s or announced thinning out their sub fleets of Superjumbos in the
This option is neither viable nor attractive for EK which has more than 110 A380s listed as assets in its books. This leads to a mounting financial problem since global travel restrictions and the fear many have of Covid-19 contagion have sent EK’s passenger numbers sharply south; a situation that might endure for some years, aviation experts predict.
Caught between the dilemma of sluggish passenger demand and a fleet that does not fit low traveler figures, EK must fast take action to avoid throwing billions out of the window by continuing operating its A380s.
The alternative is to lease smaller and operationally more efficient aircraft fitting current market circumstances such as the A350 or Boeing's B787, for instance or – optionally – considering a merger with neighboring Etihad. This would reduce costs, lead to a combined network, adjust the fleet to the new realities, but cost many jobs. This option was already on the table during the financial crisis that broke out 2008 but was dismissed by Dubai’s rulers who decided to repudiate advances from neighboring Abu Dhabi in which an EK/EY merger was favored.
Of captains & co-pilots
However, both governments are still playing hardball, despite mounting financial losses of their airlines. Should a pro merger decision be taken, it can be assumed that the much larger and comparatively more successful EK will sit in the driver’s seat, leaving the co-pilot’s role to EY despite its recent tentative recovery following restructuring measures initiated by the heavily indebted carrier (US$1.2 billion).
But it is precisely this envisaged division of power that Abu Dhabi, the economic powerhouse of the UAE, generating 60% of its gross domestic product, is strongly opposing – at least so far.
The existing internal resistance against an operationally and financially sensible EY-ET amalgamation could nevertheless be broken down from outside: In this case by the Emirate of Qatar, one of the UAE’s fiercest political and economic rivals in the Middle East.
QR hits back
Its airline, state-funded Qatar Airways (QR), has become the fastest growing carrier worldwide, both in passenger numbers and cargo tonnage. QR achieved this world-leading status despite an air blockade against the Emirate of Qatar imposed on 05JUN17, initiated and jointly controlled by the UAE, Egypt, Bahrain, and Saudi Arabia.
This, however, has now led to a long-awaited counter-reaction by QR Airways, which launched a multibillion-dollar compensation claim against the quartet. The QR managers argue that the closure of large parts of the airspace in the Gulf region to its jetliners by its Arabian neighbors and the quartet’s withdrawal of landing rights is illegal, violates rules of the Arabian League, and has cost QR more than US$5 billion since 2017, for which the carrier now seeks compensation.
It's the fleet, stupid!
Compared to EK but to a certain degree also to EY, Qatar Airways favored a different, some say ‘smarter’, fleet strategy by operating a mix of Airbus A350s (49 units) and Boeing 787 long-haul aircraft (30 jetliners). Both variants accommodate less passengers, tolerate higher cargo volumes, are more energy efficient and hence climate friendlier compared to Emirates’ mammoth A380s. This fleet composition translates into a competitive advantage in general, but particularly in Covid-19 times with passenger flows recuperating slower than anticipated.
As to QR’s 10 A380s: The airline intends to retire the aircraft for at least one year. If they will return into service after, CEO Akbar Al Baker left open in a recent statement.
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