Adieu 2011

2011 is coming to an end and it has been a rocky year regionally and globally.

Politically, The Arab Spring has resulted in regime changes and more uncertainty. Europe is in turmoil over the Euro debt and the USA goes from one funding crisis to another. Rating agencies have been downgrading major economies deepening the Euro Zone crisis. India is facing a weakening of its currency and a relative slow down in its GDP same as China.

In MENA/GCC 2011 has been an interesting and challenging year for the airlines and aviation.
Most airlines managed to expand and no aircraft orders were cancelled or deferred. Most of the MENA carriers managed to recover from the Arab Spring effects. Passenger numbers were comparable to 2010 if not better but yields suffered. Fuel amounted to 40% to 60% of the airlines cost however ticket prices remained at the same level in fear of losing passengers. Mega aircraft orders were made during the Dubai Air Show. Emirates became the largest B777 operator same as the A380. Etihad ordered additional B787s to become the largest operator. Qatar Airways will be the launch customer for the A320NEO after browbeating Airbus and ordering 50 firm and 30 options. Oman Air ordered B787s keeping Boeing happy.

The airlines of the region expanded into Africa, the CIS and South America in addition to the traditional markets in Europe, India and Saudi Arabia. Relatively new markets, in order to sustain their capacity growth in face of increasing global and regional political and economic turmoil.

There has been several major events during the year that will have an impact on 2012 and beyond:

Etihad increased its stake in Airberlin to 29% providing much needed cash to the European carrier and providing access to Etihad's network, just as Airberlin will provide Etihad with access to Germany and Europe.

The second event is the announcement by GACA of the completion of their proposals to allow foreign investment and regional carriers to operate domestic flights within Saudi Arabia and international flights from any point in the Kingdom. GACA does not know how successful this will be, but are willing to wait and see and then adjust depending on the response.

There has been other events such as the privatization of Kuwait Airways after its restructuring and the code share agreement between Royal Jordanian and Airberlin.

As 2011 passes away, I wish you all a Happy and Prosperous 2012

Etihad and Airberlin More Than a Partnership

Etihad Airways has boosted its stake in Air Berlin from 2.9% to 29.21% and signed an extensive code share partnership that covers all Airberlin's extensive European operation and Etihad's extensive global network.

The deal provides Airberlin with needed cash and Etihad access to Germany and Europe.

Not wanting to read too much into this, one cannot but wonder about a few things:

- Etihad already code shares with AA, Malev and S7 who are Oneworld partners and now Airberlin who     

  will join Oneworld in early 2012, an interesting alignment with the alliance.

- This arrangement will place Etihad in the backyard of Lufthansa, Air Canada's partner in Star Alliance and 

   one of the greatest critics of the GCC global carriers (Emirates, Etihad and Qatar Airways). Remember the 

   spat between the UAE and Canada over additional traffic rights to Canada; well, maybe just maybe, this is  

   Etihad's quiet way of paying back. Between Emirates A380 services to Hamburg and Munich and this  

   partnership, Lufthansa is surely uncomfortable, to say the least.

Regardless of all the speculation, this is a win win deal with both partners benefiting and almost 

makes Oneworld the preferred alliance in case Etihad is interested in joining. 

The UAE 40th National Day

I arrived to the UAE in May 1996 in time for the 25th National Day of the UAE; to join GAMCO.
Today marks the 40th anniversary of the country. I came at the time the Abu Dhabi - Dubai road was not yet completed. Jumeirah was not built and the old Hard Rock Cafe was literally in the middle of nowhere.

The aviation scene had two major national players Emirates Airlines and GAMCO (now ADAT) and Gulf Air was the airline of Abu Dhabi. In 1996 Emirates had a fleet of 18 Airbus A310/A300-600 and the delivery of the 7  Boeing B777 order just started in the Spring of that year. GAMCO was practically the maintenance facility of Gulf Air (GF had a 40% share of GAMCO at the time) with less than 30% of its work performed for other airlines.

Aviation has come a long way in the last 15 years; Emirates is a Global airline with a fleet of  160+ aircraft and orders in excess of 210 aircraft and Dubai International Airport is poised to become the number 2 airport in the world, and definitely the most connected airport with more than 120 airlines serving it.

I was fortunate and privileged to be a part of this success story and was directly involved with GAMCO and by extension with Etihad Airways and Air Arabia in one capacity or another.

I was with GAMCO at the time Gulf Air started facing financial difficulties in 1997 and the decision was made to decrease the reliance on GF business in favour of third party work. In 1997 GAMCO won a 5 years contract to maintain the UK RAF fleet of 9 Lockheed L1011s which was subsequently renewed in 2002. Several other European, North American and regional airlines had long term contracts for the maintenance of their fleets. GAMCO was instrumental in the launching of  Etihad Airways in 2003; Etihad  has become an airline with Global reach. The Etihad fleet maintenance is currently managed and performed by ADAT.

Air Arabia the first LCC of the region was also launched in October 2003 a month before Etihad with GAMCO providing maintenance support. Air Arabia is a true success story pioneering a concept in a region used to full service airlines. I joined when Air Arabia had 5 Airbus A320s and left 4 years later when they had 16 aircraft and an order of another 44 A320 aircraft. The challenge facing everyone was to sustain profitable growth and in 2007 Air Arabia launched a successful IPO for 700 million USD which was 1.5 times oversubscribed to become the first airline in the region to go public, it is listed in the Dubai Financial Market.

Of course there are other success stories like Flydubai, DAE, Strata, Sanad and Amroc to name a few.

Congratulations to the UAE, a progressive, tolerant and forward thinking country in a turbulent region.

2011 A Challenging Year - Revisited

2011 A Challenging Year was written in May 2011and discussed the various challenges facing the airlines in MENA and GCC and of course globally.
Four (4) challenges were listed at the time

1. The natural disasters in Japan and the ensuing damage and problems;

2. The deepening Euro zone financial woes;

3. The political upheavals in MENA and GCC; and

4. The increase of fuel prices.

As we approach the end of 2011 three (3) out of the four (4) are very real. The world have moved beyond the  natural disasters in Japan and a couple of ash clouds in the southern hemisphere.

Political and financial upheavals are still with us and will probably spill over in 2012 and the price of oil, although relatively stable at this time, is still unpredictable. Most airlines in the region including those in the India has performed well. 

People still travelled and the airlines compensated by operating to new destinations;

- Air Arabia and Flydubai looked towards the CIS and specially the Ukraine among other destinations

- Several airlines started operations to new destinations in Saudi Arabia.

- Gulf Air started flying to Copenhagen, Nairobi, Milan and Geneva with Rome, Entebbe and Juba to follow

  and embarked on a marketing campaign "From the Heart" in an attempt to woo back passengers.

- Royal Jordanian is eyeing Africa with a plan to operate to Lagos, Accra, Nairobi and Addis Ababa in the

  near future in addition to several other destinations.

- Etihad is looking to start flights to Maldives, Seychelles, Chengdu, Dusseldorf, Shanghai and Nairobi.

- Emirates is looking at Dallas and Seattle, Lusaka, Harare, Dublin, Baghdad, St. Petersburg, Rio de Jainero

  and Buenos Aires

- Qatar Airways is starting flights to Entebbe, Tiblisi and Baku in addition to increased frequencies.

All airlines have posted increases in passengers carried and in revenues coupled with a reduction in yield, including the embattled airlines in India like Jet Airways and Kingfisher.

The effects of the Arab Spring, with the exception of Syria, are subsiding in most countries and economic activities are improving or are expected to improve. The deepening Euro Zone debt crisis is taking the world on a roller coaster ride, but eventually a plan will be devised and the world will limp towards recovery.

The kicker here is the price of oil, airlines have reported increases in their fuel bill for 2011 ranging from 40% to 80%. The airlines are reluctant to increase ticket prices; on the contrary they are discounting to stimulate traffic. With Europe facing financial problems, Europeans may be less inclined to travel especially if fares increase. On the other hand, the airlines need to offset the rising fuel costs, the traditional fuel surcharge may not be the best means, fares have to eventually reflect the true cost of travel and the realities of the market.

Airlines are between a rock and a hard place, they cannot raise fares to offset oil prices for fear of losing traffic.

This will probably be the biggest challenge of 2012

Etihad Airways Eighth Anniversary

This is not meant to be a chronological history of the airline, but my impressions as someone who was involved with the starting of the airline.

Etihad Airways flew on 5 November 2003 from Abu Dhabi to Al Ain and then on 12 November flew its frst commercial flight to Beirut. At the time the airline had Beirut, Damascus and Amman as destinations. Etihad Airways has expanded at a relatively faster rate than its competitors Emirates Airlines and Qatar Airways. The airline started with 2 Airbus A330s leased from TAM and an A340 leased from Boeing to a fleet of 63 aircraft (100 on order) serving 63 destinations in 43 countries and a cargo operation serving 14 destinations.

Very few people know how Etihad Airways started. The Amiri decree forming Etihad Airways was issued in July 2003, also appointing HE Dr. Sheikh Ahmed Bin Saif Al Nahyan as the first Chairman of the airline. He also was the Chairman of GAMCO now ADAT.

GAMCO's commercial, legal, contracts and finance resources were mobilized to set up the initial business plan and proceed with the AOC. Two aircraft were leased from TAM and then one A340 ex Singapore Airlines from Boeing. An MRO team of engineers and technical personnel had to become the start up team for the airline. A building slated to be the training center became the head office of the airline and the team handled functions like recruitment, purchasing of catering and commercial  equipment. At the time Air Arabia was starting and GAMCO was called upon to provide full maintenance and engineering support for it and Etihad which was not a problem for an MRO. One challenge was to set up airline functions like scheduling and maintenance control from scratch. GAMCO had extensive experience performing these functions for Gulf Air using GF's facilities, eventually that function was tuned over to the airline.

The airline was set up between July and November 2003 with aircraft leased and delivered and all commercial and cabin equipment provided. One challenge was the IFE system which was from Rockwell Collins a system that was not very popular in the region. Collins was called on to provide support and ensure a greater than 95% dispatch reliability of the system. A task that they performed efficiently.

Another challenge, that I was personally involved with, was providing logistics support for the A330s and the A340 at short notice. A support package was prepared and acquired from AJ Walter Aviation. The agreement was made during the 2003 Dubai Air Show.

Etihad Airways is an airline that a lot of us are proud to have been associated with it and believed in the vision that now is a world class airline spanning the globe.

Finally, everyone is dazzled with the performance of the airline that they all forget that it all began in an MRO by a bunch of engineers and technical people.