GCC economies can absorb new competition from within – even another airline in Saudi Arabia

King Khalid Airport in Riyadh, Saudi Arabia. A new Saudi airline will not put existing airlines at a disadvantage, but rather create more advantages for the Gulf airline industry.

Some GCC countries are ready to establish new economic zones or engage in activities in which their neighbors are already good. This has raised questions about the intensification of competition between the Gulf states, particularly on social media, where many without professional qualifications are commenting on the subject. Others have tried to exploit these developments to give false impressions about the nature of competition.

Here we will try to address this issue of inter-GCC competition, but stripped of the hype that usually accompanies any discussion on this topic. First of all, it is necessary to understand the nature of competition. It’s a healthy phenomenon that pushes competitors to do better and contribute to the development of their business landscape. This is a common practice in all economic blocs, including within the EU, and also exists in some US states, where each is trying to provide the best environment for local economies to get a boost. .

Competition is a catalyst for creativity and development, without which things tend to get monotonous. Competition in the Gulf is nothing new; rather, it existed before the creation of the GCC Council itself. It played a positive role in the development of the GCC states, as it aimed for collective advancement.

The story of two airlines

For example, when Qatar Airways was founded in 1993, many people said that the new company would affect the Emirates airline. However, the results were impressive. The Emirates fleet has more than doubled since that time, topping 260 aircraft. As for Dubai Airport, it has grown over the past two decades to rank among the top on many parameters. The number of passengers doubled to 80.6 million in 2019. In addition, three new UAE airlines have since been established: Etihad Airways, Air Arabia and flydubai. (Most recently, there has been the launch of low cost Abu Dhabi-based flights from Wizz Air and Air Arabia.)

At the same time, Qatar Airways has grown to transform the Gulf region into one of the most important air transport hubs in the world, benefiting all GCC economies.

Space for more

The same concerns are now being raised by non-specialists after Saudi Arabia announced the creation of a new airline and forced foreign companies to open regional offices in Riyadh. What are the consequences? The Saudi decision will certainly bring positive results for all GCC states, as evidenced by the historic experience we have discussed above. But how?

First, the regional offices are essentially administrative offices. In addition to existing regional offices in the United Arab Emirates, Bahrain or Qatar, additional regional offices will also open in Riyadh. This is indeed a positive point because operations will be concentrated in the cities which offer the best and the best environment for businesses to develop further. At present, there are companies with regional offices in one city and their main activities in another.

As for the new Saudi airline, it will not disadvantage existing airlines, but rather create more advantages for the Gulf air transport sector. Why am I drawing such a conclusion?

According to the International Air Transport Association (IATA), passenger numbers will double over the next two decades to 7.8 billion, from 4 billion in 2019, and air cargo operations will double, meaning growth expected will require twice the capacity. airports and airplanes. But how will the capacity be doubled? There will be two options, firstly, existing airports and facilities will need to be expanded and secondly, new facilities and airlines will be put in place, including in Saudi Arabia.

All the talk about expected negatives is meaningless. For the strong-willed, new competition will push them to develop and provide even better services. This is clearly seen in the quality of services offered at Gulf airports. It reminds us of what His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai once said about new entrants to the market: “Welcome to the competition. . “

Mohammed Al Asoomi is an energy and economic affairs specialist in the Gulf.