First it was Kuwait based Jazeera Airways announcing the opening of its second hub in Dubai on February 8, then the inaugural flight of Saudi Arabia’s National Air Services Air (NAS Air) on February 25 and, a few weeks later, Sharjah based Air Arabia announcing its decision to go public and list its shares on the Dubai Financial Market, the largest offering, at $690 million, in UAE history. All these seemingly unrelated events indicate the coming of age of the low cost carrier segment in the region. With airlines increasingly becoming vehicles of tourism for ambitious cities, legacy carriers may have to do a lot of rethinking, especially in the intra-regional sector. Analyzing the state of the airlines industry in the Middle East, Airbus’ Global Market Forecast for 2006-25 noted that the dynamism and entrepreneurial spirit of the region is bringing tourism and business traffic in its own right. “Both tourism and business traffic to the entire Middle East has grown at a steady pace - 7.2 percent and 8 percent per year respectively - contributing to a quadrupling of the expected origin and destination traffic from 1990 to 2010 in the region,” it said, adding that the Middle East passenger fleet is anticipated to grow from 461 aircraft in service today to nearly 1,195 in 2025. As expected, the rider was on the low cost carriers. “Demand for single aisle aircraft in the region will be higher than ever before as a result of increasing intra-Middle East traffic and the opportunities available to the promising and emergent low cost carriers,” the report said. Low cost success stories such as Jazeera and Air Arabia have done more than just offer cheaper travel. Since it began operations in October 2003, Air Arabia has multiplied the number of its destinations to 33. In only its second year of operations it began to turn a profit. The airline’s turnover touched 749 million dirhams ($204 million) in 2006, registering an 82 percent rise over 411 million dirhams last year. Its net profit went up 222 percent to 101 million dirhams while its passenger traffic increased by 54 percent from 1.14 million in 2005 to 1.76 million last year. Adil Ali, the CEO of Air Arabia, is confident the low cost concept will succeed: “Budget airlines is not a new concept. It has been around in the United States and Europe for more than three decades. Our market research showed us it was time to introduce this concept to the MENA region. Air Arabia took to the skies in October 2003 with the vision of bringing a globally successful business model to this part of the world and then adapting that model to the unique needs of the region. Low cost done right. “With the proper implementation of the low cost concept, Air Arabia was able to redefine air travel in this region through offering the best rates in the market and without sacrificing service and safety standards. As a company that flew 3 million passengers in the fourth year of operations, we see a positive future for the aviation industry in the Middle East. “On the operations level, we have recently signed a joint venture agreement with Hong Kong Engineering Co. to meet the airline’s engineering and maintenance requirements. We intend to use the proceeds from Air Arabia’s upcoming IPO offering to expand the size of existing fleet from nine to 34 aircraft in 2016.” Jazeera Airways, which serves major destinations in the Middle East, North Africa and the Indian subcontinent, in March added Tehran as its 20th destination in 15 months. The airline registered on-time performance of 93 percent and flew 600,000 travelers in 2006, 10 percent of Kuwait International Airport’s total traveler traffic for the year. Marwan Boodai, the chief executive officer of Jazeera Airways, said the traffic volumes and destination expansion augurs well for the opening of the new hub in Dubai. “Our name said it all. Jazeera is Arabic for the Arabian Peninsula, and we are working to be the leading airline for travel in the region. The only way to do this is by having multiple hubs in the Peninsula,” he said. The airline will have two major hubs - Kuwait and Dubai - and a “baby” hub in Bahrain with direct flights to Dubai and Kuwait. According to Boodai, regional tourism growth has benefited the aviation industry and the destination cities. “When we launched on October 30, 2005, we generated a lot of concern from the aviation industry in the region. Some believed we would steal travelers from them. But as Jazeera celebrated its first anniversary last year, the industry noticed the opposite had happened. We had added capacity combined with attractive fares, and the ongoing marketing had had a spillover effect on the other airlines and in turn actually stimulated the entire market to growth levels the industry has not witnessed in years. This phenomenon has come to be known as the ‘Jazeera Airways Effect,’ which has not only had an impact on Alexandria, Amman, Beirut and Damascus but most of the cities Jazeera Airways flies to,” said Boodai. This is a confirmation, he said, that low cost does not mean low quality. “Low cost is a business model that runs on high efficiency, standardization and yield management. Most of the world’s successful low cost airlines operate brand new aircraft, just like us,” he said. Going up. Saudi Arabia’s newly launched NAS Air expects to increase its fleet size to reach 19 aircraft by 2010. The airline will cover 22 Saudi destinations during its first year of operations, expanding to 37 domestic routes by the end of 2008. The journey of Kuala Lumpur based budget carrier Air Asia has been strikingly similar. Anthony Fernandes, its CEO and the man behind its success, said he was pilloried when he first proposed his low cost model, but is now being f

   Email This Post      Print This Post