While full-service commercial airlines may still dominate the Middle East skies, low-cost carriers (LCCs) have been showing vigour as their regional market share steadily widened in 2009, the Centre for Asia Pacific Aviation (Capa) noted in an analysis released late-March.
The agency reported that regional budget carriers accounted for 8.3 per cent of the total seat capacity of flights operated within the Middle East in 2009, rising slightly from the 7.4 per cent market share recorded a year earlier.
However, regional budget airlines’ capacity share of international flights to/from the Middle East was a bit lower at 6 per cent – a performance that was nonetheless significant when compared with the 4.8 per cent seat capacity share registered in 2008.
“The region’s existing LCCs are growing rapidly to destinations both in the Middle East and outside and have significant narrowbody aircraft orders to deploy in coming years,” says Capa.
The agency also believes that the budget airline segment is set to post more favourable gains in the next two years, but not without challenges.
“Overall, the growth outlook is very promising as competition intensifies across the Middle East, but conditions could be bumpy for the new entrants. There will be inevitable bouts of protectionism, rapid capacity expansion and attendant yield pressures, as well as continued government support of loss-making flag carriers in the region,” the agency said.
No-frills carriers spread their wings
Capa noted that the regional aviation industry currently has seven existing LCCs: Air Arabia (Sharjah), Air Arabia Maroc (Casablanca), Jazeera Airways (Kuwait), flydubai (Dubai), nasair (Saudi Arabia), Sama (Saudi Arabia) and Bahrain Air (Bahrain).
In September last year, Air Arabia said it will launch its third hub – this time in Egypt (Air Arabia Egypt) – in partnership with Travco Group. The new airline was expected to be operational by the first quarter of 2010, but a more recent official announcement has moved its launch date around mid-April this year.
The regional LCCs’ combined fleet has also grown to include 66 aircrafts, with an additional 150 on order and scheduled to be delivered within the next two years. Since Air Arabia launched the region’s first budget airline in 2003, the entire LCC segment has managed to extend its reach to a total of 92 destinations composed of 37 in the Middle East, 16 in Africa, 17 in Europe and 22 in India and the sub-continent.
Capa said nasair, Jazeera and Air Arabia still dominate the intra-Middle East market between the LCCs in terms of destinations while Sama operates the least number of destinations.
Last month, Dubai-based flydubai has launched Muscat and Kuwait as its 12th and 13th destinations, respectively, exceeding expectations regarding its earlier announcement of launching 12 destinations in its first year of operations. The airline first took off in July 2009.
The LCC segment’s growth has proven to be resilient to the global economic meltdown, which hit the aviation industry in general. In an earlier interview with Alrroya.com, spokespersons of regional budget carriers said the crisis had actually been beneficial to them as passengers seek a cheaper alternative to air travel.
Capa agreed that low-cost airlines have taken advantage of the opportunities created for them by the financial downturn. “Progressive opening of aviation access and a desire by the new entrants to establish offshore bases and cross-border [joint ventures are] also driving development,” the group added.
Local media have also noted that the UAE was reportedly considering the launch of a third budget carrier based in Abu Dhabi, although official details have still been undisclosed at the time of this writing.
Liberalisation key to LCC development
The Sydney-based Capa believes that further growth opportunities for the low-cost airline segment could be achieved as regional governments push forward with liberalising aviation access arrangements.
“With the start of 2010, the Association of Arab Air Carriers (AACO), which is an active proponent for regional liberalisation, reports the ‘regulatory environment in the Arab world is moving ahead with some liberalisation steps,’” the agency said.
Such initiatives in liberalising the aviation sector, according to the AACO, have been evident in Jordan where the civil aviation regulator broke Royal Jordanian’s eight-year monopoly by allowing a more active industry competition.
At the moment aside from Royal Jordanian, only smaller airlines and chartered services are operating in the country, but that scenario is expected to change as the country’s liberalisation efforts progress.
Lebanon has likewise recently allowed its national carrier Middle East Airlines (MEA) to be challenged as the government gradually loosens its hold on the carrier amid a planned IPO.
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