Low-cost carriers spread their wings


By Kathi Everden  www.kippreport.com

With FlyDubai now the second biggest operator out of Dubai International Airport and Air Arabia dominating Sharjah’s aviation scene, there is no doubt that low-cost travel has taken off in the region.

FlyDubaiThe YouGovSiraj Travel Tracker December 2010 showed the percentage of business travellers using a low-cost carrier (LCC) for short-haul flying rose from 48 per cent in 2009 to 64 per cent in 2010, while around two-thirds of leisure travellers also used a LCC – and both sectors expected to use these airlines more in the future.

According to Scott Birch, research manager for travel and tourism at YouGov Siraj, people are turning to LCCs as a way to get more out of their budget: “The trend signals a diminished distinction between an economy seat on a legacy carrier that is essentially the same seat on a LCC.”

Other findings included increased online booking, with 83 per cent of both business and leisure travellers taking to the web to make travel arrangements, with nearly half booking all of their trips online: “Online booking is often under-estimated in the region, but our results show that online is a key channel for travel booking, in the UAE at least.”

Responding to demand, carriers such as Air Arabia and flydubai are pursuing aggressive expansion plans, but the fragile nature of the sector and low margins has been demonstrated by slashed profits and closures at some other regional LCCs.

Air Arabia’s profit plunged by more than 30 per cent, attributed to rising fuel costs, while operationally it flew at an average 83 per cent load factor with 4.45 million passengers. It is also negotiating for a Jordan hub to add to its existing networks out of Sharjah, Egypt and Morocco, and will take delivery this year of six of the 44 A320 aircraft on order – with plans to double its fleet by 2016.

Over in Saudi Arabia, Kuwait and Qatar

Kuwait’s Jazeera Airways recouped its position in the second half of 2010 with healthy second-half results trimming full-year losses to KWD2.8million  ($10 million), following a loss of KWD8.2million ($29.5 million) in 2009 – but airline officials say the carrier is on track to serve 82 routes in the Middle East within five years.

Its neighbour in Kuwait – Wataniya Airways – was unable to sustain operations, attributing closure to both bad financials and the insecurity in the region, as well as a ‘flood of capacity’ in its home market, while Saudi’s Sama suffered a similar situation and ceased operations in autumn last year.

Aiming to carve its own niche, Saudi’s remaining LCC – Nasair – has signed a code-sharing deal with Qatar Airways to feed in to that airline’s long-haul routes, and is planning more regional connections to destinations such as Iraq, Iran, Pakistan and Africa.

In Qatar, a pending order for short-haul Bombadier aircraft could signal the launch of that emirate’s first LCC as a division of Qatar Airways, while Eithad has dipped its toes in the water with the launch of economy-only flights to selected short-haul destinations.

On the fast track, flydubai operates to 30 destinations less than two years since its 2009 launch, offering services to secondary cities and destinations that are not on the radar of the bigger carriers.

New on its network is Abha and Gassim in Saudi Arabia, Sohag in Egypt, Ashgabat in Turkmenistan, Chittagong in Bangladesh and Port Sudan, while it will take delivery of nine B737-800 aircraft in 2011 as part of its 53-plane order on launch.

And demonstrating how different a low- cost model can be from traditional airline operations, both flydubai and newcomer RAK Airways have announced arrangements with exchange bureaux to permit customers to pay for bookings made via a call centre – serving customers without access to credit and online services.