New Awakening for a Tired Industry

Most Americans would be surprised to learn that the Middle East is such an important market for new jets.

The Gulf’s leading airlines — Emirates (out of Dubai), Etihad (out of Abu Dhabi) and Qatar Airways have become big reasons why Boeing and Airbus make any money. These outfits are still buying planes and will need more. After doing not much of anything earlier in the year, passenger growth is growing again in the Middle East. As Airbus CEO Tom Enders put it: ‘The Middle East is still the hub of aviation growth.’

There are different guesses out there as to just how many planes the region will need. The ranges are impressive in any case. The Middle East should buy 1,400-1,700 planes, at a cost of $240-300 billion over the next 20 years. These planes will support passenger growth of nearly 5% annually over that time.

The growth in aviation is a kind of sidecar to the great emerging market story. Maybe it is less obvious than some other ideas, but it is as real as any of them. If you look at Airbus and Boeing, it’s fascinating to see where some of their new large orders are coming from. Airbus just signed a $1.8 billion deal with Vietnam Airlines for four A380 superjumbos and two A350s. Ethiopian Airlines recently put in an order for 12 A350s, at a cost of $3 billion. These are just two examples.

The Asia-Pacific region, despite the impressive growth out of the Middle East, is still the largest buyer of aircraft. Over the next 20 years, for instance, the Asia-Pacific region will require close to 9,000 planes, at a cost of over $1 trillion.

New routes, more passengers… as this ‘Great Convergence’ continues its work, the aviation industry should feel the benefits. It’s no different, historically speaking, than the expanding trade routes across Asia that we know as the Silk Road.