Where the Skies Are Headed: Data, Dollars and the Middle East

In 2024 there was a significant turning point for the international airline industry as air travel surpassed pre-Covid-19 levels, with full-year traffic 3.8% above 2019 levels, according to the International Air Transport Association (IATA).

As the industry recovers, a growing share of the international business is being taken by Middle Eastern airlines and airports.

 The wealth of the region, its strategic location close to three continents, and the ambitions of its airlines, are all factors. 

The European industry faces higher environmental taxes, and the continent’s airlines cannot fly over Russian airspace owing to the Ukraine war. Also, western Europe is densely populated, making airport expansion difficult.

Qatar Airways has grown in scale and reputation in recent years. In an interview in March, Badr Mohammed al-Meer, the chief executive, said that the airline was in talks with manufacturers with a view, to increasing capacity from 50mn passengers per year to 80mn by the end of the decade. It would be followed by a deliberate pause in further expansion. Capacity at the Hamad International Airport, Doha, would be reached by then.

In mid-May, Qatar Airways confirmed a major order with Boeing – for a potential total of 210 Boeing 777X and 787 Dreamliners in a deal worth $96bn, announced during President Donald Trump’s visit to the Gulf.

Also in May, Qatar Airways Group reported its strongest ever financial results, posting annual profits of QR7.85bn ($2.15bn) for the 2024-25 fiscal year. This was an increase of more than QR1.7bn ($500mn) compared with 2023-24. Qatar Airways Cargo, a division within the group, registered a 17% increase in revenue.

Badr Mohammed al-Meer said in his March Financial Times interview that the quality of service among some other carriers had deteriorated as they expanded rapidly, drawing attention to the importance of customer service in the industry.

 Many airlines are looking to increase the strength and reliability of Wi-Fi connections for passengers, for example by using the Starlink satellite network. As things stand, Internet connection tends to be weak and erratic for those in the air.

This commitment to service and the latest communications technology implies that Qatar Airways will need to operate the newest aircraft on its routes.

 Given its large fleet, and the fact that a well-serviced aircraft can operate for 20 years, this opens the opportunity of opening a leasing arm, with older aircraft leased to budget airlines. Doha is a conveniently based hub for a leasing company, with the highest standard of aircraft maintenance.

In aviation, one area where customer service is set to be improved through technology is by using robotics and AI to smooth security clearance at airports.

 Having to empty cabin luggage and pockets is an inconvenience for travellers, but advances in AI allow the ability to identify banned items via x-ray images, while facial recognition can spot individuals on watch lists.

One factor behind the resurgence of air travel may be the sudden de-prioritising of sustainability and net zero as business issues – although development of renewable technologies will continue.

 But while a zero-carbon emissions commercial flight is still a few years off, energy efficiency, which reduces emissions, has long been a major factor in determining whether an aircraft is commercially viable. Engine manufacturers have made significant progress in improving fuel efficiency.

Two high-profile, innovative aircraft – Concorde in the 1970s and the super-jumbo Airbus A380 in the 2000s and 2010s – were sold at far lower levels than the manufacturers hoped, in part because of lower energy efficiency compared with competitors and, in the case of Concorde, concerns over noise and air pollution.

These major investments may appear to be strategic errors by the manufacturers, but this is to misunderstand the nature of the industry. Designing and building a commercial aircraft costs billions of dollars in investment, while the design, testing and manufacturing process takes years. 

It is impossible to anticipate market conditions several years ahead. Disruptions such as the financial crisis of 2008 and the pandemic of 2020-2022 cannot be anticipated. Both had a seismic impact on travel, especially business travel.

For example, the double-deck, four-engined A380 super-jumbo is relatively cost-efficient on a per-passenger basis, but only if the airline fills all or nearly all of the seats. 

As an airline executive once observed, if demand for a certain route is less than hoped for, you cannot send the top deck somewhere else. Production of the aircraft ceased in 2021. Efficient, twin-engined aircraft now dominate the market, including for many longer routes.

For decades, Boeing and Airbus have been the major suppliers to the industry, and they continue to dominate.

 The Brazilian company Embraer is a significant manufacturer of mid-sized aircraft. 

Will this pattern change in the future? Chinese car companies have emerged as global players, especially in the EV market, and a similar development could emerge in aviation. 

The Chinese state-owned aircraft manufacturer Comac has civil aircraft in commercial use. The narrow-body jet airliner C919 is being flown by Chinese carriers on domestic routes, and is undergoing certification for international routes. The wide-body C929 is in development.

It would be sensible to anticipate growing market share for Comac in the coming years.

The centre of gravity of the aviation industry is undergoing something of a shift from Europe and America towards Asia, and global growth is likely to continue – but, as with any industry, it is difficult to predict future disruptions and other developments.

The author is a Qatari banker, with many years of experience in the banking sector in senior positions.