CEO Middle East has an exclusive interview with John Brayford, the CEO of RAK Airways, as his airline starts to offer international flights from Ras Al Khaimah International Airport and business class seats
RAK Airways has had mixed fortunes, it’s safe to say. It started in 2006 as the national airline of Ras Al Khaimah. It ceased operations in 2009 but restarted in 2010 with new management and new ambition.
So far, led by John Brayford, those ambitions are fast becoming reality – within five years, it expects to have 25 routes and 1.5 million passengers a year, three times more than today. In addition, it recently announced a new codeshare agreement with Etihad Airways. It was RAK’s first such agreement - although it was Etihad’s 39th - and it now means RAK Airways has suddenly opened up connections across the globe.
“I think there is a strong future for RAK Airways. We are lucky that the region has escaped the financial crisis. The world centre of aviation has shifted from Europe to the Middle East. And it’s a nice place to come to,” says Brayford.
The airline currently runs a fleet of three three Airbus A320 aircraft, but will add another one in March 2013 and a fourth in November 2013. In theory, all this would point to RAK Airways joining the low cost segment of the market – but Brayford is quick to dismiss this notion.
He explains: “The United Arab Emirates is home to some of the world’s most successful carriers. It is quite a busy marketplace, yet it is not very crowded. There are plenty of opportunities as the UAE continues to grow and RAK Airways has very ambitious growth plans in the next few years. The UAE is home to two very successful low-cost carriers. We found that to set ourselves up as a low-cost competitor to Air Arabia and Fly Dubai was going to be a relatively impossible task for two reasons. First, Air Arabia is well established. Second, FlyDubai, which has come a long way in the past two to three years, is extremely well funded and has been able to grow much quicker than a normal business model would permit.”
Brayford adds: “This is not the situation for RAK Airways. [Our] investors have not lavished a huge startup fund to enable us to go out and purchase [our] first 20 aircraft. The investors of RAK Airways wanted an airline that would support the growth of Ras Al Khaimah (RAK) in particular. So we wanted to offer a more inclusive product that brings better value to our customers than what the [other] low-cost carriers have provided.”
Brayford is clearly confident of success, though he couldn’t have picked a more difficult industry to be in right now. The International Air Transport Association (IATA) has raised its profits forecast for global airlines in 2012 by a third to $4.1bn (£2.5bn), due to efficiencies and consolidation. Sounds good? Not really, when you consider that the figure was $8.4bn last year. And, according to IATA, profits this year remain on “a knife edge.”
In fact, a huge chunk of that figure comes from Emirates Airline. Admirably, the UAE’s other carrier, Etihad Airways, is also now profitable. But these two big guns are the exception to the rule. In the US, more than 40 carriers have at some stage been forced into Chapter 11 bankruptcy.
Compare this to FlyDubai, which only started flying three years ago, has been a staggering success. In the first 18 months of operations it launched 31 routes, and this year is expected to turn its first profit (with close to 50 routes now on the books).
Air Arabia, the Middle East’s biggest budget carrier, reported a 12 percent rise in first quarter profit as demand for low cost transport increased. Net income for the three months ending March 31 increased to AED47m (US$12.8m) from AED42.7m a year earlier while revenue rose to AED621.9m from AED513.2m.
But Brayford says: “We are an Emirates flight, rather than a low-cost-plus. We provide an inclusive product relevant to the [price] we charge. As RAK Airport is relatively remote, compared to say, Sharjah, we run a bus service, which is a complimentary service that enables our passengers to begin and end their journey where they live… Our unique selling point is also based around service. We have got a European-type travel model where you get on board, you have a comfortable seat, and you are served by friendly, professional staff.”
However, Brayford stresses he is not concerned by political unrest in the region and the spike in oil prices. “What we have seen is that there has been a significant shift of European tourism into RAK because of weariness over some of the traditional airline stops, such as Sharm el-Sheikh in Egypt. So that gives us a foothold, especially in the big tourism markets such as Germany, because they are seeing RAK as a stable and viable alternative. We also offer competitive pricing. That has proven very successful, and we want to be able to continue supporting that.”
Brayford adds: “As far as fuel is concerned, there is no question that for us it has gone up in price. Although it is quite stable now, and has been for the past month, there are some significant differentiators in price in, for example, Pakistan and Nepal, [where] fuel is extremely expensive. As a small carrier, when operating in those destinations, it is very difficult to spread the cost of fuel across the network. So what we have had to do is to take stock of our network, and we cut two routes in order to develop. With the increase in fuel price, we could not sustain them.”
Brayford does have a lot going in his favour, with RAK undergoing a huge tourism push right now, including the development of the mega Real Madrid football theme park.
He says: “If you assume that the UAE market will continue as it has, I don’t think there is an endpoint. I think we have easily five years growth as a regional airline. The approach the carriers around here have taken is the difference between half full and half empty. Europe looks at what it can protect and the carriers here look at what they can achieve”.
Brayford adds: “In many ways the European carriers have lost their way. It’s a labour issue, it’s a trade union issue, it’s a product issue, it’s a network issue ,it’s a reputation issue. It’s all very well to save money but if you save money at the expense of the customer then eventually the customer will think twice about flying.”
So far, the numbers suggest few people are thinking twice when it comes to flying with RAK Airways.
*Additional quotes for this interview were taken from www.rakairways.com.