Abu-Dhabi based Etihad Airways and Sharjah-based Air Arabia are partnering up to bring Abu Dhabi its first low-cost carrier (LCC).
For a region famous for its low-cost carriers (LCC), it was only time before Abu Dhabi were to get its own.
Abu-Dhabi based Etihad Airways and Sharjah-based Air Arabia, the region's first LLC, are partnering together to bring Abu Dhabi its first LCC, to be named Air Arabia Abu Dhabi. It will join other big names in the LLC sector like flydubai and Jazeera Airways.
In a press release, the two companies explained that they will establish an independent joint venture company that will operate as a low-cost passenger airline with its hub in Abu Dhabi International Airport. The new carrier will complement Etihad Airways’ services from Abu Dhabi and will cater to the growing low-cost travel market segment in the region.
Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group, said: “Abu Dhabi is a thriving cultural hub with a clear economic vision built on sustainability and diversification. With the emirate’s diverse attractions and hospitality offerings, travel and tourism play a vital role in the economic growth of the capital and the UAE. By partnering with Air Arabia and launching Abu Dhabi’s first low-cost carrier, we are serving this long-term vision”.
He added: “This exciting partnership supports our transformation programme and will offer our guests a new option for low-cost travel to and from Abu Dhabi, supplementing our own services. We look forward to the launch of the new airline in due course”.
No launch date, destinations or routes were disclosed as of yet, however.
The partnership will certainly deliver mutual benefits to both parties. Yet, despite being branded as Air Arabia Abu Dhabi, indicating an Air Arabia branded airline, Etihad possibly stands to gain more.
Saj Ahmad, Chief Analyst at StrategicAero Research, said that since Etihad is in the midst of financial restructuring and currently unable to launch its own low-cost carrier, the move to work with Air Arabia will help it tap into a market in which they do not have a presence.
"If anything, there's a big risk that Air Arabia will cannibalise some traffic that would otherwise travel to its hub in Sharjah," he said, adding that Etihad may want to push some services regionally to places like Saudi Arabia or re-enter Iran too.
For the new carrier, Ahmad believes, the fleet will likely come from Air Arabia's existing inventory to ensure that operations can commence quickly. "It will also ensure that costs stay capped and that both airlines can pool resources rather than having to wait for new airplanes."
According to Air Arabia's listing online, the airline's current commercial fleet consists of 53 planes. Etihad, on the other hand, has a commercial fleet of 103 planes. The combined fleet totals 156 jets.
Ahmad also highlighted that passengers will benefit from Etihad's presence at Abu Dhabi International Airport, which will save them having to travel out to Sharjah just to capitalize on the more economic flights.
"For the here and now, it's a better move for Etihad than it is for Air Arabia - but passengers will reap rewards regardless. As the partnership expands, the potential for connectivity growth and new markets will ensure that the partnership mirrors that of Emirates and flydubai," he concluded.
With the addition of Air Arabia Abu Dhabi, the UAE will be left with a total of 5 local airlines: Emirates, Etihad, flydubai, and Air Arabia. Given international challenges that have brought travel giants like Thomas Cook down, and the soon-to-be overcrowded local market in the UAE, Air Arabia Abu Dhabi has its work cut out for it.
Currently, Air Arabia is boasting healthy financials. The airline posted a record second quarter net profit of $57.2 million (AED 210 million), up 75% year-on-year. Air Arabia CEO Adel Ali said the airline will decide on new aircraft orders by January 2020. The decision will be made in the last part of 2019 or in January next year, Adel Ali said at a conference in Dubai. He said the company would order around 115 to 120 planes.
As for Etihad Airways, it posted a massive $1.28 billion loss last year, with passenger numbers, cargo revenues and freight traffic suffering. This marked the third year of consecutive losses for the company. Perhaps, as Ahmad explained, this new partnership could prove more beneficial to the aviation giant than Air Arabia, helping it to expand its offerings and cash inflows.
According to the press release, the UAE’s travel and tourism sector contributes to over 13.3% of the nation’s GDP and enjoys a prominent standing as a global aviation hub, thanks to the UAE’s ultra-modern infrastructure, advanced services sector and high-quality air transport.
The MENA low-cost air travel model was first introduced in the UAE in 2003 and has been rapidly growing since then. Today, the Middle East market enjoys the third highest gains in intra-regional low-cost carrier penetration rate. Low-cost carriers accounted for 17% share of seat capacity to and from the Middle East in 2018, compared to only 8% in 2009.