Middle East set for low cost aviation boom

March 23rd, 2008 - 12:53 pm ICT by admin  

By Aroonim Bhuyan
Dubai, March 23 (IANS) In November last year, during the Dubai Air Show, Emirates ordered $23.4 billion worth of aircraft from Airbus and Boeing, with options for 50 more. Today, experts here say, this “options for 50 more” is what is going to help the Dubai government spread its own version of low cost wings. Though it has been made clear that this new airline would be independent of Emirates with its own brand and identity, the fact that the Emirates chairman will also be the chairman of the new airline and a senior Emirates executive has been made the new company’s chief executive is what is having regular travelers here excited.

The first and obvious beneficiaries are the millions of expatriate workers in the booming construction industry who find it hard to afford the tickets of premier all-frills airlines. There are around 35 million expatriates in the six Gulf Cooperation Council (GCC) countries and 5.5 million of them are from India alone. In the UAE, the Indians number around 1.4 million.

Experts say this Dubai government initiative would open up the low cost aviation sector in the Middle East as the demand for low cost tickets is huge. The airline will be the third low cost carrier in the UAE and the seventh in the Gulf.

But experts say there is room for more and rival budget carriers need not worry.

“The Middle East is a natural region for low-cost aviation growth,” John Strickland, director of London aviation consultancy JLS, told the Gulf News newspaper. “There is going to be enormous traffic flow between the UAE and countries such as India and Pakistan.”

Dubai-based Al Ghaith & Al Moosa Travel Agency sells around 50 low cost airlines tickets everyday. Its manager Abdul Karim told City 7 television, “According to me, it (the number of budget airlines in the region) is not enough. Another three-four such airlines and then there will be competition.”

Figures prove this.

In February this year, Air Arabia, Middle East’s first low cost airline, reported a net profit of 376 million dirhams ($102.4 million) for the financial year ending December 31, 2007 as against a net profit of 101 million dirhams($27.5 million) in 2006, an increase of 272 per cent!

In 2007 alone, the Sharjah-based airline, which flies to 11 Indian destinations, carried 2.7 million passengers in its fleet of 11 aircraft.

Similarly, this month, Kuwait stock exchange-listed Jazeera Airways reported a net profit of 2.29 million Kuwaiti dinars ($8.5 million) on operating revenues of KD34.7 million ($130.2 million) in 2007, an increase of 61.2 percent over operating revenues of KD21.5 million ($80.6 million) the previous year.

The airline flew 1.2 million passengers by the end of the year, doubling the number of passengers from 2006, at a load factor of 74 percent, an increase of 12 percent.

In February last year, Saudi Arabia’s first budget carrier Nas Air took to the skies. Within four months, it flew its 100,000th passenger.

‘Nas’, in Arabic, means ‘people’.

Though it currently flies to over 20 destinations within Saudi Arabia, the airlines plans to add 12 international routes by the end of this year to break even. “The key traffic flows will be the UAE, India, Pakistan and Egypt,” Nas Air chief executive Edward Winter was quoted as saying.

Welcoming the new Dubai airline, chief executive of Air Arabia Adel Ali said, “We have long believed the low-cost carrier market in the Middle East is set to grow simply because the region is growing so fast and the low-cost carrier market penetration is still small.”

And the reasons are obvious.

According to K.V. Shamsudheen, chairman and managing trustee of the Pravasi Bandhu Welfare Trust, given the rising cost of living in the Gulf, the airline would come as a boon to workers here. “Given the rising cost of living here, Indians can now travel more frequently to their home country instead of bringing their families here,” Shamsudheen told IANS.

Al Rais Travel managing director Mohammad Al Rais told the Khaleej Times that the airline would be popular to expatriates travelling home.

“We have a lot of expatriates who can travel home only once a year. With a low cost ticket, they can make it home four times a year,” he said.

Tourism is another factor.

According to Al Rais, as of now, all airlines to Dubai are usually filled to capacity and with tourism increases part of the Dubai government’s 2015-targeted strategy, demand for airline seats will grow.

Kamal Lochan Das, regional director for West Asia and Africa of the Incredible India programme, said that the new airline would also help boost tourism in India.

“The Gulf market is very important to us. With Air Arabia operating to India, the inflow of tourists from the Gulf to India increased by at least 17 percent in the last one year,” he said.

“If Emirates can start a budget airline, I expect a significant increase to this number and people will be able to visit more and more places in India.”

The new low cost carrier boom in the region is not restricted to launching of new airlines alone.

It is about new alliances as well.

“With Emirates’ new initiative of the launching a low-cost carrier, Dubai becomes an even more powerful hub,” US-based aviation analyst Addison Schonland told Emirates Business 24-7.

“And that is going to irritate other airlines - Emirates competitors such as (Abu Dhabi-based) Ettihad Airways and Qatar Airways - and force them to look at something similar,” he said.

“The other carriers may not start their own low-cost arms, but may form alliances with other low-cost carriers, which is actually a much cheaper way of doing the business.”

With India’s leading budget carrier Air Deccan, recently acquired by Kingfisher, planning to fly on the Gulf routes after national carrier’s low cost version Air India Express, the sky is the limit for the low cost aviation sector in the region.

Tags: , , , , , , , , , , , , , , , , , , ,

Posted in Business |