In the Middle East, low-cost competition is heating up in 2019 more than ever before. 2020 might be just as intense. Spicejet, Air Arabia, and Jazeera Airways have been making moves that will expand their fleets or networks, increasing air traffic in the region. So what’s behind all of this growth and expansion?
The latest moves by budget airlines in the region
This is what CEO Ajay Singh had to say to Arabian Business and other media at a press conference in October:
“We are looking to establish an airline locally based in Ras Al Khaimah. We are applying for certification shortly and the approval will take around three to six months. The new airline will help connect India with Eastern and Western European destinations using RAK as hub.”
Much has happened in 2019 in the Middle East low-cost carrier world. Air Arabia just placed a massive order with Airbus that will effectively triple its fleet once the full order is received. Kuwait-based Jazeera Airways just began its service to London and has since commenced service to several other destinations including Dammam (Saudi Arabia) and Karachi (Pakistan). Furthermore, Indian budget carrier SpiceJet will be launching its own low-cost airline in the Middle East.
The following airlines are worth keeping an eye on in this region:
- flydubai: Based in Dubai with an all-Boeing 737 fleet of 54 (including a number of grounded MAX jets).
- Air Arabia: Including its Egyptian joint-venture, the Sharjah-based carrier has an all-Airbus A320 fleet of 45 jets.
- flynas: Based in Saudi Arabia with headquarters in Riyadh, the budget carrier has a fleet of 32 Airbus A320-family jets. Surprisingly, it once had two Boeing 747-400s. flynas also recently placed an order for 10 Airbus A321XLR jets.
- Jazeera Airways: Based in Kuwait, the airline currently only has 12 Airbus A320s.
Beyond the established players, there will be some new kids on the block in 2020:
- SpiceJet: The budget Indian carrier will be starting its own UAE-based airline quite soon.
- Wizz Air: The European LCC has agreed to establish Wizz Air Abu Dhabi. The airline could launch as soon as the second half of 2020.
Air Arabia’s expansion plan is particularly interesting as it also has Air Arabia-branded joint-ventures in Egypt and Morocco. Further growth is slated to take place via its new partnership with Etihad with the setup of “Air Arabia Abu Dhabi”. This will allow Etihad’s extensive long-haul network to feed into Air Arabia’s regional network and vice versa.
“Home to the first low-cost carrier in the MENA region, the UAE has developed over the years to become a world-leading travel and tourism hub. We are thrilled to partner with Etihad to establish Air Arabia Abu Dhabi that will further serve the growing low-cost travel segment locally and regionally while capitalising on the expertise that Air Arabia and Etihad will be providing”. -Adel Al Ali, Group Chief Executive Officer, Air Arabia
Reason #1: Strategic location
There are two explanations we can see as fueling all of this growth. But it comes down to one word: Geography. The middle east is situated nicely between the major cities of Europe in the northwest, the fast-developing East African cities in the west, and India and Pakistan in the east. This makes the middle east a perfect place to set-up a budget airline – attracting passenger traffic from within the region but also across much of the eastern hemisphere.
In fact, this has been Dubai-based Emirates’ key to growth. Much of its passenger traffic connects through its hub rather than making it a final destination, with its ultra-long-haul services spanning every continent except Antarctica. The low-cost carriers in the region are hoping for the same, but on a much smaller scale.
Reason #2: economic diversification
Connected to the theme of geography, the location of these Middle Eastern countries means that they have been blessed with vast amounts of oil leading to a great amount of wealth. But in recent years, with shifts towards greener energy sources and the awareness of climate change, many countries in the region have come to realize that their oil-fueled-party could eventually come to an end.
Simone Tagliapietra of the Financial Times says it perfectly:
“Historically, Middle Eastern petrostates have turned to diversification during periods of low oil prices, typically proposing various initiatives to increase the private sector’s role in the economy, encourage small and medium-sized enterprises (SMEs), to create jobs and invest in education and innovation.”
In fact, it’s very clear that this phenomenon is the main force driving the UAE emirate of Ras Al Khaimah with its decision to work with SpiceJet to get its own budget airline up and running:
“The government’s vision to promote economic diversification, and focus on strengthening the tourism and hospitality sectors, has been a key factor in Ras Al Khaimah’s growth as a vibrant business destination” -Abdulla Al Abdouli, CEO of Marjan (via the Khaleej Times).
The big question is if there is enough demand for the rapidly increasing ‘supply’. With so many carriers expanding, one needs to ask if they can all fill their planes and reach/maintain profitability.
Do you think there are other reasons for the rise of budget carriers in the middle east? Who will be the winners and losers? Let us know what you think! Also, let us know if we missed any budget carriers that are worth keeping an eye on.