Gulf States Shake Up Region’s Airline Sector With New Carriers And Management Changes

The past few weeks has seen talk of large aircraft orders in the Middle East, along with speculation about new airline launches and management changes at existing carriers.

It all points to a sense of revival for an industry that is still emerging from the Covid-19 pandemic and also suggests that the oil-rich Gulf states continue to see aviation as a key component of their plans to revamp their economies.

In recent weeks, the Abu Dhabi sovereign wealth fund ADQ has been handed full ownership of Etihad Aviation Group by the emirate’s Supreme Council for Financial and Economic Affairs, giving it control over the flag-carrier Etihad Airways.

Earlier in the year, the airline group’s ancillary businesses, including ground handling, training and cargo services, were moved into ADQ. The fund, which also has a stake in Wizz Air Abu Dhabi, is now the most important actor in Abu Dhabi’s aviation sector.

In a separate deal, ADQ has also offered to form a new aviation services group by merging two of its portfolio companies – Etihad Engineering and the Advanced Military Maintenance Repair and Overhaul Center – with helicopter operator Abu Dhabi Aviation (ADA) and local aviation services firm GAL.

ADA is 30% owned by another Abu Dhabi sovereign wealth fund, Mubadala, which often works closely with ADQ on co-investments and promoting new areas of economic activity such as the hydrogen industry.

Almost immediately after Etihad Airways was handed to ADQ, there was a management revamp, with chief executive Tony Douglas being replaced by Antonoaldo Neves, a former boss of Portuguese national carrier TAP.

ADQ said Douglas “has decided to pursue an opportunity elsewhere”. While it did not give further details, there has been speculation that he will reappear in Saudi Arabia to head up RIA, a new airline being set up by that country’s sovereign wealth fund, the Public Investment Fund (PIF).

No launch date has been announced for RIA, but on October 23 Bloomberg reported that the PIF had opened talks with Airbus and Boeing to buy up to 80 new jets for the airline. Reuters later said a deal for “almost 40” Airbus A350 jets might be announced at the Future Investment Initiative (FII) conference in Riyadh although, at the time of writing, no deals had emerged.

There has also been speculation that the PIF might launch another new airline, to serve the futuristic city of Neom, which is being developed in the sparsely-populated northwest corner of the country.

All this activity is taking place against a backdrop of a concerted effort to diversify Gulf economies away from their reliance on oil and gas revenues. Aviation is seen as a critical element in that. Policymakers in many parts of the region look on with admiration and perhaps envy at Emirates, the Dubai-based carrier which has underpinned the growth in that city-state’s tourism and business sectors over the past few decades.

Emirates, like many other airlines, is currently rebuilding after the pandemic, with 6,000 new cabin crew hired in the past year according to a statement by chairman Sheikh Ahmed Bin Saeed Al-Maktoum on October 25. He said the airline should return to profitability “this financial year”.

Elsewhere in the region, governments are also supporting their airlines with new plane orders and management reshuffles.

On October 21, Kuwait Airways received its seventh A320neo aircraft from the Airbus factory in Toulouse, France. A further 11 Airbus aircraft are due to be delivered in the coming years.

Kuwait Airways chairman Captain Ali Al-Dukhan unveiled the airline’s latest financial results three days later, saying it expected losses for 2022 to be around 50% less than those for 2019, before the Covid-19 pandemic hit. “We also expect to achieve break-even point in the budget by the end of 2024,” he said.

Bahrain’s sovereign wealth fund Mumtalakat Holding Company has also recently reshuffled the board of directors of Gulf Air Group, saying the move would “streamline operations”.