A new mega-airport poses the biggest threat yet to Emirates, Etihad and Qatar Airways
AIRPORT MEGAPROJECTS are ten a penny these days. China is building Beijing Daxing International Airport, a new hub airport near its capital, with a total capacity up to 100m passengers a year. Construction has begun on a vast new airport for Dubai, which its government hopes will eventually draw 130m flyers annually. Abu Dhabi and Qatar plan to erect cavernous new terminals. Yet perhaps none is as ambitious as Istanbul’s New Airport, on Europe’s eastern fringe in Turkey. It became fully operational on April 6th and aims not just to impress visitors but also help the country’s flag carrier, Turkish Airlines, wrest the skies from its successful Gulf rivals.
It is easy to dismiss the endeavour as a white elephant erected by Turkey’s sultan-like president, Recep Tayyip Erdogan. Everything about it is huge. Turkish, which is by far the new airport’s biggest user, had to move 10,000 pieces of equipment weighing over 47,000 tonnes 40km (25 miles) from its old home at Ataturk airport. In less than five years a forested valley the size of Manhattan has been transformed into a facility with enough room for 3,000 flights a day carrying 90m passengers a year. That could make it one of the world’s largest airports by international passenger numbers. If all goes to plan, by 2028 the airport will have six runways and capacity for 200m flyers a year.
Its $11bn price tag, too, is gargantuan, especially when Turkey’s economy is shrinking and inflation tops 20%. Delays and cost overruns forced the grand opening to be postponed by six months. In the rush to get the airport finished at least 52 builders have died, sparking protests.
Foreign airline executives see more than a prestige project, however. Compared with many of those in the Gulf, this one presents a sounder business case, thinks Mark Martin, an aviation consultant based in Dubai. Turkish is growing at an annual rate of 30%, unlike its Gulf rivals, whose expansion has stalled or gone into reverse (see chart). While it was fast running out of room at Ataturk airport, the threat it posed was limited. No longer.
Over the past decade the Gulf’s three biggest carriers—Emirates of Dubai, Etihad of Abu Dhabi and Qatar Airways—redefined air travel. Most international carriers transport passengers to and from the airlines’ home countries. Emirates, Etihad and Qatar used their “super-connector” home bases as a place where flyers changed planes en route elsewhere. The focus on higher-margin long-haul routes allowed them to charge less for superior service, luring passengers away from hub airports in America and Europe, and from the Western airlines that use them.
Now they risk being disrupted in turn by Turkish. The new airport is designed to turn Turkish into a fully fledged super-connecting airline. Fees that airlines, including Turkish, are charged for every passenger favour those in transit over those who start or end their journey there. Kadri Samsunlu, chairman of IGA, the new airport’s operator, also says that its shopping areas were designed to be more attractive even than Dubai’s and Qatar’s.
The falling value of Turkey’s currency has also proved beneficial. Analysts at CAPA, an aviation consultancy, calculate that Turkish earns 14% of its revenue in Turkish lira, but incurs 26% of its expenses in the currency. A weaker lira therefore lets it undercut rivals in the Gulf, which do not enjoy a similar advantage.
Finally, Istanbul is helped by its proximity to Europe. Turkish can use smaller narrowbody aeroplanes, which are cheaper to operate, on its routes to Europe, unlike the Gulf carriers that have to use bigger, more expensive widebody jets that are great for long-haul flights but less efficient for middling distances. Smaller aircraft, including long-haul ones, allow it to offer more flights to most destinations each day. Business travellers are willing to pay a premium for such flexibility.
The Gulf carriers are not giving up without a fight. In February Emirates cancelled most of its remaining orders for the A380 super-jumbo, the world’s biggest passenger plane, in favour of smaller models. Sir Tim Clark, the president of Emirates, hopes that a partnership with flydubai, another Emirati airline that only flies narrowbody jets, will help it to preserve market share. If imitation is the sincerest form of flattery, Gulf carriers are reciprocating Turkish’s earlier compliments.