gulf\s budget airlines set the pace
Last Updated : GMT 06:49:16
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Last Updated : GMT 06:49:16
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Gulf's budget airlines set the pace

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Arab Today, arab today Gulf's budget airlines set the pace

Dubai - Arabstoday

The low-cost carrier (LCC) market in the Middle East could capture 20 per cent of the air market in next few years, with the region's two biggest budget carriers, Air Arabia and flydubai, leading the growth, according to the UK-based Official Airline Guide (OAG), a leading provider of global aviation intelligence. "This could happen if the market here follows the Asian example," said Gordon Bevan, vice-president of Consultancy Services at UBM Aviation. The Middle East at present has less than 10 per cent of the LCC market, while Asian LCCs are expected to close 2011 with 20 per cent of the market, according to industry data. "The aircraft orders of the UAE's budget carriers — Air Arabia and flydubai — could easily double the size of the existing low-cost carrier sector capacity," Bevan told Gulf News. Flydubai has 17 aircraft and more than 50 Boeing 737s on order to carry out its expansion plans. Its chief executive Gaith Al Gaith recently said he would like to see the LCC's current market share of around 10 per cent increase to "as much as 35 per cent". Air Arabia, which operates 27 new Airbus A320 aircraft on 67 routes from three hubs — in the UAE, Morocco and Egypt — expects its fleet to reach 55 aircraft by 2015. The Sharjah-based budget carrier, which pioneered the LCC concept in the region, is due to receive four more A320s this year of the total 44 it has ordered from Airbus. Further afield, having cancelled orders for 25 Airbus A320s in March, Kuwaiti low cost carrier Jazeera Airways has 15 of this type on order. Of these, 11 have been delivered and the remainder are due between 2012 and 2014 as a part of the airline's fleet modernisation programme. To achieve this enormous growth, however, LCCs in the Middle East will have to explore new markets as existing major city pair markets are becoming saturated, as Bevan points out. "LCCs will have to stretch their sector length to find new markets," he said, adding that possible new markets may be Saudi Arabia's domestic operations "if Saudi Arabia liberalises and permits cabotage [internal air traffic] — a real prospect". ‘Neighbouring markets' "LCCs should enter the Madinah market as there is a significant Umrah market from neighbouring markets," Bevan said. "LCCs [in the region] will have to either secure more fifth freedom rights to extend the network, or open up more bases as Air Arabia has done, which has the same effect," he said. He added that the budget carriers in the Middle East will have to "start creating more connecting products" as the point-to-point market can be "limited". "This is already starting," Bevan said. Outlining the ultimate expansion step, he said the next step for this region's LCCs could be the launch of long haul operations. "This would permit direct Saudi-South Asia and South East Asian operations, for example," he said. Singapore Airlines recently announced the launch of its long haul budget arm, which is expected to kick off operations next year. Interestingly, around seven years ago, low-cost airlines' regional market share by passengers was just one per cent. Since then, the low-cost carriers [in the Middle East] have seen their market share grow to between 6 per cent and 8 per cent in 2009, and to almost 10 per cent now, according to industry data. Aggressive expansion Despite huge aircraft orders and aggressive route expansion plans, the growth wings of the low-cost carriers in this region are somewhat clipped, according to industry experts. As Bevan points out: "Traffic right issues could block further expansion. "My view is that LCCs are the right business model to enable greater growth in Africa, but this is complex in aero-political terms," he said. Echoing similar views, Dr Fariba Alamdari, the vice president of marketing and value analysis for Boeing Commercial Airplanes, cited "lack of liberalisation" as the key constraint for growth of the region's LCCs. "Lack of liberalisation, or openness of the market, means LCCs can't operate to anywhere that makes commercial sense to them. "They cannot do that as they have issues getting the bilateral rights to have access to other countries," she said. Global scene Meanwhile, more than one flight in every five worldwide is operated by a low-cost carrier, with Europe having the highest regional penetration with 28.2 per cent, according to the OAG's latest June data, which indicates that the low-cost sector is bolstering global airline growth. It further indicated that there is now significant LCC presence in South America where 22.7 per cent of published flights for June are in the low-cost sector. The conservative overall growth rates in North America this month, meanwhile, hide a story of continued LCC expansion, with US to international seat capacity increasing by 18 per cent, according to OAG June data. It also revealed that figures for Africa, on the other hand, although comparatively low, reveal a significant year-on-year rise of 42 per cent in LCC flights this month, while low-cost operators account for a substantial 60 per cent market share of India's domestic flight capacity.

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