Gulf airlines take up the global challenge

Battered by high fuel costs and rival low-cost budget carriers, the next blot on the horizon for European and Asian airlines is the massive expansion of the Gulf airlines into long-distance travel.

Over the past few years Emirates has emerged as a major customer for the Airbus A380 double-decker jumbo, while Gulf Air has been turned around by a new management team. Meantime Qatar Airways has become the fastest growing carrier in the world, and Abu Dhabi's Etihad Airways is also launching new routes like there was no tomorrow.

Emirates and the other carriers that follow its every move are going long-haul. They are attacking the domination of the European, Asian and even now Transatlantic airlines.

Take, for example, the Europe to Australia route. Emirates only started to fly Down Under in 1996. Yet today the airline flies to all the major Australian cities, and offers a premium service at a discount to other carriers.

Here is the rub for the Gulf airlines' competitors. Local labor laws mean low-cost air crew. Gulf airlines have access to a vast pool of capital at modest, or no cost to them. And even fuel is cheaper in their home airports. Buy in world-class management skills and this is a business model that flies.

So while European airlines are forced to consolidate, and many in the industry expect to see British Airways, Lufthansa and Air France to be the sole survivors of the next European aviation downturn, the future for the Gulf carriers looks particularly bright.

Their fleets will be expanding, and adding the most modern aircraft, at the same time that European carriers find themselves increasingly strapped for cash.

All the same, the hub-and-spoke networks of the biggest three European carriers should ensure their future - even the European discount carriers can not challenge this natural advantage.

For the airline passenger in the Middle East this is good news. Competition among regional carriers will keep service levels high and ticket prices low. There will also be more flights available to more destinations than ever before, on board the most modern aircraft.

Yet the Middle East is currently in such a boom that all the carriers serving the region - including the big European and Asian airlines - are having a ball. However, the number of aircraft on order and the ambitions of the Gulf airlines mean that this is one particular party that can not last much longer.