Kippreport investigates if oil prices aren’t the only cause for the market slumpAugust 27, 2015 12:00
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
The frequently bizarre announcements from the region’s airlines in the last twelve months have overshadowed a much tamer one: In a market where companies have staked their reputations on luxury and comfort, the region’s low cost carriers are thriving.
In 2009 alone, four new low-cost carriers launched in the Middle East, a region that’s experiencing an upswing in passenger numbers and bucking the overall global trend.
It’s the latest news from the airline industry here that makes the past 12 months some of the wildest on record. First there was Qatar Airways announcing that it had flown a plane fuelled entirely on natural gas, a feat of rather questionable economics.
The company then announced that it would explore so-called ‘biofuels.’ Then there was the off-beat proclamation from the master of ‘sustainability’ publicity, Masdar, that it would develop fuel from a plant that grows in Abu Dhabi’s salt plains.
The steady proliferation of low cost carriers is downright tame by comparison. But the news is nothing less than extraordinary when compared with the worldwide trend. Around the globe the airline industry is still suffering the effects of the financial downturn.
After a 10 percent decrease in passenger traffic in the Middle East in 2008, the market lurched forward in 2009, according to a Merrill Lynch energy report. Although the region still trails the sort of growth displayed in the East Asian market, the Middle East saw a small rise in the number of passengers at a time when passenger traffic in both North America and Europe continued to plummet.
The increased demand in the region is good news for airlines, which have been squeezed in the past year as fuel prices rose, and many companies are optimistic about their plans for expansion. “There are several ways to expand the business,” the chief executive of Kuwait-based Jazeera Airways, Stephan Pichler, says.
“We can increase the frequency on our routes, so instead of flying somewhere five times we fly seven times. We can add new routes and the last isn’t organic – we want to pay an active part in acquisitions.”
A 2008 article in the ‘Journal of Transport Geography’ found that the region’s full service luxury carriers such as Dubai’s Emirates, Abu Dhabi’s Etihad, and Qatar Airways have to enter the European market in order to fill their capacity. There is not enough regional demand for their full service routes.