It is not a scenario many want to think about, but its effect on an industry easing its way out of a three-year slump could be catastrophic.
In a copycat, but even more deadly, attack following recent incidents in Egypt, Bali and Jordan, terrorists explode a bomb at Dubai’s airport or one of its landmark beachfront hotels, killing dozens of holidaymakers and business travellers. The region’s engine of growth, largely responsible for powering the civil aerospace sector’s recovery, comes juddering to a crawl, and with it production lines throughout the aerospace supply chain.
With its throngs of European tourists and symbols of capitalism, from Starbucks to Microsoft, Dubai would seem an obvious target for West-hating extremists. The United Arab Emirates, of which Dubai is a part, has been a military ally of the USA. So far, the authorities have kept a firm lid on the terror threat: although the atmosphere is relaxed, security is known to be tight.
But if the worst were to happen, how extensive would be the confidence-blasting effect on the wider region, and consequently on the global industry? A glance at the chart, right, shows just how much of the airframers’ backlog is tied up in the region. While other areas of the Middle East – from North Africa to the Levant – have had to deal with instability, ranging from isolated terrorist attacks to virtual civil war, their relatively low importance in terms of aircraft orders means the impact of a major incident in, say, Beruit, Cairo or Casablanca on wider regional and industry confidence tends to be limited and short-lived.
But the Gulf airlines’ large fleets and even bigger expansion plans mean any attack in Dubai is likely to have a much bigger ripple effect on regional confidence.
Emirates alone is responsible for 63 of Airbus’s 478-strong widebody backlog and 25 of Boeing’s total of 462. Forty-five of the 149 A380s on order are destined for the Dubai airline. Add Dubai’s immediate neighbours – Etihad of Abu Dhabi, Qatar Airways and Air Arabia in Sharjah – all of which would directly feel the impact of such an incident, and the industry’s risk grows to a frightening level.
However, some analysts and experts believe the industry takes the risk of an implosion in the Gulf economy, sparked by terrorism or some other unforeseen event, in its stride. Ben Fidler of Deutsche Bank says the risk from political instability in the region is “on the agenda” with the manufacturers . But he adds: “What are they meant to do – not take the orders?” The risk has to be balanced against the rewards. Several years of double-digit growth and strong profits make Emirates’ ambitions “eminently achievable”, says Fidler.
Dr Alan George, a Middle East expert at St Antony’s College, Oxford University, says a terrorist attack in Dubai would lead to a sharp fall in tourists there and elsewhere in the region, but the repercussions would be short-lived. Although local tourism is important, Emirates’ business model is based on carrying business travellers, expatriate workers and passengers hubbing through Dubai, all groups that would be less likely to cancel travel plans because of a terror scare. “An attack certainly wouldn’t bring the airlines to anywhere near a halt,” says George.
One senior London-based analyst agrees. “If there was an attack in Dubai, we would expect an initial impact, but where this sort of thing has happened, the aviation sector has shown it is resilient,” he says. “There is an initial dip and then travel comes back.”
Boeing’s view is that, while terrorism remains a risk in the region, the main factor driving airline growth is economic performance. “Yes, Iran, Iraq and Syria are unstable,” says Lee Monson, regional senior vice-president for Boeing Commercial Airplanes. “But if you factor out these countries, the governments in the region are doing a great job on security and on boosting their economies.”
HELEN MASSY-BERESFORD & MURDO MORRISON/LONDON & DUBAI