Low cost airlines are storming into the regional market. Are they challenging the full service carriers or risking overkill? Trends magazine reports.
February 10, 2010 12:34 by Emily Meredith
When asked about the seven aircraft Flydubai is expecting to add this year, Ghaith declined to comment on whether the aircraft would be purchased or leased, saying the decision depends on the specific terms of financing available at the time. Even if there is consolidation in the market as it matures, there is more room for growth. Globally, low cost carriers make up 23 percent of the market, but in the Middle East they comprise just 7 percent, according to recent data from the International Air Transport Association. “We are still not where we could be if you compare like to like,” said al Ghaith, referring to the European and American markets.
Air Arabia, based in Sharjah, UAE, has grown rapidly since it was established seven years ago. It has announced plans to expand operations by opening a third hub in Egypt this year, after opening one in Morocco in 2009.
In the past, Middle East carriers have differentiated themselves by offering luxurious full service. Airlines have traditionally been the domain of governments, with national carriers established to carry a country’s flag and reputation.
Emirates brands itself further by buying up British soccer teams and sponsoring English Premier League referees, familiarizing thousands of fans both with the brand and with the country.
But these efforts at international exposure come at a cost to the consumer: Full service, jumbo jets, and fully flat seats are pricey propositions for most travelers. These airlines sell service rather than efficiency.
In 2005, Kuwait liberalized its airline market and allowed private airlines; Jazeera established itself shortly thereafter. Air Arabia’s chief executive says he thinks the next year will see further liberalization of the market.
But even with more liberalization, regional airlines face problems that their counterparts in Europe and America do not. The larger legacy carriers in Europe and America operate in large unified geographic regions, which means domestic carriers can fly between cities with large populations unrestricted. But there is no blanket agreement allowing regional carriers to fly into the territory of another country, so each airline relies on governments to sign so-called open skies treaties in order to expand.
Al Ghaith said these restrictions mean Flydubai has to be extremely flexible when looking at underserved markets in which to expand. “We are an airline at low cost. We take opportunities where they come.”