Turning the Corner - low cost airlines in the Gulf

According to bq magazine, the remarkable growth of Gulf–based full service carriers (FSCs) like Qatar Airways, and UAE’s Etihad Airways and Emirates, is now being followed by low-cost cariers (LCCs) from the region.

The LCC business model is well exploited around the world – especially in Europe, North America and parts of Asia, but the concept is relativly new in the Gulf, where just little more than a decade ago nobody considered the possibility of LCCs.

Everything changed when Air Arabia was founded in Sharjah in 2003, becoming the first low-fare airline in the region.

The market was open and the stage was set for others who soon followed: Kuwait’s Jazeera Airways in 2004, Saudi Arabia’s flynas (former Nas Air) in 2007, and Dubai’s flydubai in 2008. According to OAG, UK-based aviation data monitor, “A quiet revolution” is taking place in the GCC region when it comes to LCCs.

“According to OAG Schedules Analyser, LCCs will have flown 37 million air passenger seats to, from and within the Middle East in 2014, compared to just nine million five years ago. Providing 13 percent of all scheduled airline seats, their contribution is still relatively small compared to the LCC market share in Europe, the US and parts of Asia, but they’ve grown at a breathtaking rate, averaging 35 percent per annum over the past five years,” says OAG’s newest report from last November, significantly titled, ‘Like bees to a honeypot: low-cost carriers swarm to the Middle East.’

In the report submitted to bq magazine, the OAG analytics team is forecasting a bright future for regional LCCs: “Prospects for LCCs operating in the Middle East look good and the region is clearly a fertile ground for the on-going development of the LCC business model whether in the form of hybrid operations, expansion into the long haul market or premium versions of the low cost product.”

Liberalisation of air markets

Low-cost carriers have been gaining in market share in the Middle East, though the gains have been marginal according to The International Air Transport Association (IATA) spokesman Chris Goater.

“This is because although they are growing fast, so are the big long-haul carriers, so the LCC share of the market has only grown marginally. However, it is also clear that LCC penetration in the region is a lot lower than other regions such as Europe and the US. Part of the reason for this is, while economic growth within the Middle East is solid, air travel is still hampered by regulatory restrictions,” he says.

As a result, growth is not balanced and we see long-haul demand growing at a faster rate than inter-regional traffic.

“The Damascus Convention of 2004 provides a framework to remedy this with regional liberalisation, but the number of countries that have ratified the Damascus Convention is insufficient,” says Goater. 

For more on this story visit bq magazine’s website