How regional low-cost carriers are flying high amid travel recovery
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How regional low-cost carriers are flying high amid travel recovery

How regional low-cost carriers are flying high amid travel recovery

The Middle East’s budget carriers are cashing in on the growing trend for affordable luxury and increasing demand

Gulf Business
Low-cost carriers

Traditionally viewed as exotic and luxurious holiday destinations, Middle Eastern countries are trying to recover tourism without diluting their ‘luxury’ appeal.

A report by data analytics and consulting firm, GlobalData, predicts that the Middle East is set for a low-cost carrier (LCC) boom, as the region experiences demand for affordable luxury.

As such, countries like the UAE, Bahrain and Kuwait are diversifying into mainstream leisure markets with the help of low-cost carriers. The premise is simple: travel cheap, but still holiday in luxury. With the onset of the pandemic, low-cost fares have become valuable and perhaps the most influential factor in booking a holiday as shown in a GlobalData Q3 2021 Global Consumer Survey. Fifty-eight per cent of the survey’s respondents pointed toward the cost factor.

Amongst UAE-based respondents, 57 per cent agreed with this sentiment. Both numbers high-light the demand for affordable holidays along with a demand for low-cost airlines from both inbound and outbound tourists. With passengers facing the pressures of grow-ing inflation, budget airlines with fares costing up to 60 per cent less than average full-service carriers have become the preferred choice for a majority of travellers.

From top-line growth to expanding networks and fleets, the region’s budget carriers have demonstrated an upswing in all areas. Flydubai reported an “exceptional performance” for the first quarter of 2022 with a 114 per cent increase in passenger numbers compared to 2021. The air-line carried 2.35 million passengers between January 1 and March 31 this year.

Connecting traffic also surged by 15 per cent from last year, touching the 43 per cent mark compared to 2021’s 28 per cent. One of the few budget carriers to have a premium offering, demand for business class grew across its global network: Europe saw an increase to 51 per cent in 2022 up from 39 per cent in 2021. Sharjah-based Air Arabia showed a net profit of Dhs291m for Q1 2022, a whopping 756 per cent increase compared to the Dhs34m registered for the same period last year. With an average seat load factor of 79 per cent, more than 2.4 million travellers took off from the carrier’s five hubs between January to March.

Sheikh Abdullah Bin Mohammad Al Thani, chairman of Air Arabia, says: “The strong performance we witnessed last year continued in the first quarter of 2022 and was supported by higher customer demand for Air Arabia’s value-driven product as well as rigid cost control measures that the airline took since the start of the pandemic.” The airline ended 2021 on a high too, reporting a net profit of Dhs720m. Touching Dhs3.17bn, Air Arabia’s turnover for 2021 was 71 per cent higher than that of 2020.

Etihad Airways’ joint venture with Air Arabia further endorsed the rising significance of LCCs in the aviation landscape. Launched during the peak of the pandemic, Air Arabia Abu Dhabi was created to serve the two-fold purpose of complementing Etihad Airways’ services from the UAE capital, as well as catering to the low-cost travel segment. The airline reported a “fully profitable” first year, calling its performance a “testimony to Air Arabia’s ability to run a very tight ship indeed”.

This year, Air Arabia Abu Dhabi expects to carry over a million passengers, up from 800,000 since its inception in July 2020. If the start of the pandemic in 2020 seemed like a setback for European carrier Wizz Air, which had just announced the creation of Wizz Air Abu Dhabi in partnership with Abu Dhabi Development Holding Company, the airline managed to turn around the situation in its favour quickly.

Michael Berlouis, managing director of Wizz Air Abu Dhabi, says: “We’ve been able to grow our network to more than 38 destinations within a five-hour flight time radius of Abu Dhabi despite all the challenges of the pandemic. Post-pandemic, we have been capitalising on the countries that have been opening up and the pent-up demand for travel, with the GCC encouragingly leading the way as one of the quickest tourism markets to recover.

”Wizz Air Abu Dhabi launched more than 34 destinations and operated over 1,000 flights amidst continuing restrictions. Despite a persisting pandemic, the country’s low-cost carriers (LCCs) added a host of new destinations to their networks as well. In April, Wizz Air Abu Dhabi added seven new European destinations to its net-work followed by stops in Saudi Arabia and Sri Lanka. “We are also ramping up our operations further in 2022 by bringing a fifth aircraft into operation; adding more frequencies to our exist-ing routes and starting new destinations including Dammam, Kuwait and the Maldives. We are looking forward to doubling the size of the team in 2022 to 400 as well as increasing the size of our fleet,” adds Berlouis.

Demonstrating its prowess as MENA’s largest low-cost airline, Air Arabia added 43 new routes to its global networks from its hubs in the UAE, Morocco and Egypt in the first nine months of 2021. Not just new destinations, Air Arabia has gone all out to announce two new budget carriers, Fly Arna and Fly Jinnah, in collaboration with the Armenian National Interests Fund and Lakson Group respectively.

The same optimism is evident in the region’s other popular LCCs as well. Kuwait’s Jazeera Airways booked a net profit of KD7.1m (Dhs84.7m) for 2021, up 126.8 per cent from 2020. Its passenger numbers touched one million, a 48.2 per cent hike from the previous financial year. Operating revenue for 2021 stood at KD80.4m (Dhs96m), up 94.3 per cent, and operating profit increased by 152.2 per cent to KD10.8m (Dhs129m).Apart from passenger numbers, LCCs are also playing a huge role in the demand for aircraft.

“The latest market analysis suggests that budget carriers such as Air Arabia Abu Dhabi and Wizz Air Abu Dhabi will drive demand for new narrow-body aircraft,” said Danielle Curtis, Exhibition Director ME, Arabian Travel Market, in a statement.

The forecast is on point as starting in 2024, Air Arabia will start taking delivery of the 120 Airbus A320neo aircraft order it placed in 2019. Encouraged by its 2021 financial results, Saudi carrier flynas is looking to increase its outstanding aircraft order to 250 after receiving approval from its board of directors earlier this year. The airline already has 120 aircraft on order with Airbus, of which 21 have been delivered. flynas is currently discussing drafting agreements with aircraft manufacturers.

Having bases in numerous countries has also been beneficial to LCCs – they could quickly move crew and aircraft around to match market conditions or commercial deals. With increased frequencies, new destinations, and a growing fleet, LCCs are certainly leaving no stone unturned to reclaim, and even expand, their share of the skies.

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