Complex Made Simple

Are regional low-cost airlines’ taking off or at risk?

Aviation in the region as a whole is struggling, and low cost airlines are feeling the struggles, but the way some are carrying about their business makes it look as if it’s all under control.

But Sharjah-based Air Arabia is actually posting gains.

Considered one of the largest low-cost carriers in Middle East and North Africa region, Air Arabia posted a 27 per cent increase in the third quarter’s net profit, beating analysts’ forecasts, as it carried more passengers and cut costs.

Read: Time to say goodbye to Emirates Airlines’ Airbus A380

Read: Will flydubai deal save Emirates Airline’s plummeting profits?

Growth in numbers

The net profit in the three months ending September 30 reached AED376 million (nearly $100m), compared with AED297m ($81m) in a year-earlier period, Air Arabia said in an e-mailed statement.

Egyptian investment bank EFG Hermes had forecasted a third quarter’s net profit of AED202m ($55m) for the carrier.

The airline’s second quarter net profits increased 21 per cent to AED158m ($43m) following deep cuts in costs.

“The solid third quarter results reflect the continuous appeal for our value driven product combined with the cost control measures and robust growth strategy adopted by the airline management team,” Air Arabia Chairman, Sheikh Abdullah Al Thani, said.

Read: Emirates and flydubai: from codesharing to terminal sharing

“We are glad to see Air Arabia delivering strong financial and operational performance throughout 2017 despite the continuous pressure on yield margins that airlines in the region are witnessing.”

Passenger numbers for the Sharjah-based airline, which competes with flydubai in the low-cost travel segment in the UAE, increased three per cent to 2.33 million in the third quarter from a year earlier, after registering 2.05 million in Q2.

Air Arabia, which started operations in October 2003, flies to around 133 destinations and has a fleet of 48 Airbus A320s. It received three new Airbus A320 planes in the first nine months of this year.

Air Arabia added 14 new routes to its global network during the first nine months of this year from its operating hubs in the UAE, Morocco, Egypt and Jordan.

It made its intentions clear earlier this year that it may consider Boeing, Airbus or Embraer aircraft to accommodate longer routes.

flydubai expands

flydubai reports $8.6 million profit in 2016, but in August 2017, it announced its results for Q2 and reported a total revenue of $689m, an increase of ten per cent compared to the first six months of 2016, but nonetheless a loss of $38.8m.

The airline did increase passenger numbers to 5.4 million in Q2, an increase of 10.5 per cent over 2016.

Nonetheless, flydubai continues to expand. It opened up 66 new routes that previously did not have direct air links to Dubai or were not served by a UAE national carrier from Dubai.

It recently opened with Russia four new destinations and increased frequencies on existing routes, a company statement said.

The airline’s first flight to Makhachkala landed on 31 October and was greeted by a traditional water cannon salute. The carrier also inaugurated flights to Voronezh, resumed services to Ufa and announced the launch of flights to Sheremetyevo International Airport in Moscow as of 29 November.

These new routes, together with the increased frequencies from mid-December, will expand flydubai’s footprint in Russia to 11 points and 52 weekly flights. The carrier continues to explore new opportunities to service the market, while continuing to operate direct air links to the remaining points in Russia, including Kazan, Krasnodar, Mineralnye Vody, Moscow (Vnukovo), Rostov-on-Don, Samara and Yekaterinburg.

Jeyhun Efendi, Senior Vice President Commercial (UAE, EU, ME, CIS) at flydubai, said: “It has been seven years since flydubai entered the Russian market and we continue to expand our footprint in the country. With four additional routes and increased frequencies, we’re offering more options to explore Russia for travellers from Dubai and across our network.”

flydubai operates flights to more than 95 destinations in 44 countries, operates a single fleet type of 58 Next-Generation Boeing 737-800 aircraft and will take delivery of more than 100 aircraft by the end of 2023.

Slow growth in passenger traffic

The whole passenger traffic for carriers in the Middle East region recorded a 3.7 per cent year-on-year rise in September, the slowest pace of expansion since February 2009.

That was mainly due to business contracting on US routes, following enhanced travel and security restrictions this year, according to the International Air Transport Association (IATA).

“The Middle East-US market has been hit hard by the now lifted cabin ban on large portable electronic devices, as well as the various proposed travel bans to the US,” said the trade body.