Forget legroom: Middle Eastern airlines are going for bed, bath, and beyond luxury.
For $21,000, Etihad Airways’ new 125-square-foot “Residence” suite lets passengers ditch those bourgeois first class seats for an in-flight room with a view—plus a private bathroom, bedroom for two, and a butler trained at the luxury Savoy Hotel in London.
The airline’s effort to woo big spenders flies in the face of most Western airlines’ penny-pinching strategies, which include squeezing more seats onto a plane and haggling with passengers for bags fees and meals. And as these amenities grow to include less wait time in security lines, critics are clamoring that Abu Dhabi-based Etihad presents security concerns and enjoys unfair business advantages.
Etihad Chief Executive James Hogan is confident the Residence-fitted A380s, which roll out December, will bring in serious money. “Obviously there’s going to be a halo effect in the positioning of Etihad Air as a premium carrier,” he said. “But we wouldn’t do it unless we felt we could make money with it. This is a top-end market. There is demand here.”
Other Gulf rivals Qatar and the United Arab Emirates also are betting on high-end travel options. Qatar Airways begins exclusive business-class-only flights from Doha to London-Heathrow this month, while Dubai-based Emirates Airlines also has imminent plans to launch bedrooms featuring room service. Emirates coach passengers flow through an entirely separate floor from those in business and first class in its dedicated Dubai concourse.
Etihad is the smallest of the three government-backed carriers, but has placed orders for more than 220 additional planes, including 10 Airbus A380s and 71 Boeing 787 Dreamliners. With 2013 profits of $62 million, it also has been buying stakes in foreign carriers, including Virgin Australia, Aer Lingus, Air Serbia, and Germany’s second largest airline, Air Berlin.
One particular aspect of Etihad’s soaring growth is worrying to American carriers and the U.S. Congress: In March, the Transportation Security Administration (TSA) began allowing Etihad passengers to preclear U.S. Customs and Border Protection formalities in Abu Dhabi before boarding their flights. The facility—only for Etihad—costs U.S. taxpayers $425,000 a year. The U.S.-U.A.E. Business Council announced Etihad passengers can skip immigration upon arrival in the United States and get treated as domestic passengers—with shorter times between connecting flights.
Besides the issues of national security and U.S. funding involved, U.S. airlines and the lobby group Airlines for America (A4A) opposed the preclearance facility because it gives Etihad an unfair business advantage. Ynetnews reported an even graver concern: Etihad refuses to carry Israeli passengers because the United Arab Emirates—its home country—does not recognize the Jewish state.
During a July 2013 hearing of a House subcommittee on Foreign Affairs, Lee Moak, president of the Air Line Pilots Association, pleaded with Congress to block the preclearance site: “U.S. airlines … are determined to compete in the international marketplace. But we need a level playing field. So putting a permanent halt to this Abu Dhabi facility is a critical step in that direction.”
Instead, Congress gave the foreign airline a marketing advantage of no-customs arrivals.