Complex Made Simple

Between Air Arabia and flydubai, who’s winning the low cost supremacy battle?

Air Arabia PJSC today reported strong financial results for the first quarter of 2018.

Air Arabia reported a net profit of AED110 million ($30m) for the three months ending March 31, 2018, an 8% increase compared to the corresponding 2017 figure of AED102 million ($28m), according to a company statement.

It registered a turnover of AED877m ($239m), with more than 2 million passengers flying the carrier between January and March 2018 with an average seat load factor of 805.

Saj Ahmad, Chief Analyst – StrategicAero Research tells AMEinfo that one of the key advantages out of Sharjah for Air Arabia is that “one, it’s a less congested airport which in turn keeps operational costs for the airline in check, and second, it pulls in traffic from neighbouring Um Al Quwain and Ras Al Khaimah – two points that are much further away from say Dubai.”

“And so by tapping into these places, Air Arabia has a very robust passenger base.”

Read: Emirates airlines posts stellar financial performance: Here’s how it did it

Sheikh Abdullah Bin Mohamed Al Thani, Chairman of Air Arabia, said: “The strong passenger demand combined with the solid cost control measures that we took in driving cost margins lower continue to positively impact the financial performance of the carrier.”

Air Arabia added three new routes from its hubs in the UAE and Egypt in Q1 2018, with flights commencing from Sharjah to Moscow Sheremetyevo in Russia and to Jeddah and Kuwait from Sohag in Egypt.

This was followed by the announcement of new flights from Sharjah to Qabala in Azerbaijan; Izmir and Bodrum in Turkey staring June 2018 and to Grozny in Russia starting April 2018.

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Playing catch up?

According to Ahmad, in contrast to flydubai, Air Arabia has slightly fallen behind in annual traffic.

“However, the biggest differentiator now between flydubai and Air Arabia is the former’s links to Emirates and the massive international network that will feed flydubai and that’s before you take into account the roughly 10% passenger growth per annum that flydubai is experiencing, say Ahmad.

“flydubai also has the edge on revenue growth too and as it continues its robust organic expansion, it’s likely that Air Arabia will continue to play catch up.”

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The race for efficient aircraft

While Air Arabia through its operations in Jordan, Morocco and Egypt give its some 130 destinations versus 104 for flydubai, the Dubai based airline is far more ambitious with its frequencies, growth and future expansion, says Ahmad.

“flydubai operates over 60 Boeing 737s, including the new fuel efficient 737 MAX 8, which gives them a massive cost edge over Air Arabia which has arguably dithered over its fleet replacement while flydubai has signed up for more than 225 new 737MAX airplanes to help slash costs,” explains Ahmad.

“So Air Arabia really needs to get off the fence and address this because the geopolitical landscape suggests that oil price increases are here to stay and that will damage their bottom line and pricing flexibility over the long run.”

In contrast, Air Arabia has just 6 leased A321neo’s coming.

“That is not nearly enough to compete with flydubai’s huge 737 MAX fleet, notwithstanding competitive pressures from other GCC airlines like flynas, flyadeal, SalamAir, Oman Air, Jazeera Airways and even Wataniya,” says Ahmad.

“That said, Air Arabia has started 2018 in very good shape. While Ramadan will have an impact on Q2, it’s the summer period where they can really make a difference, particularly operating out of Egypt and Morocco, two very tourist-heavy markets.”