Will there be more budget carriers in the Gulf?

Ed Attwood wouldn't be surprised to see the launch of the likes of FlyQatar or Etihad Express
By Ed Attwood
Fri 19 Apr 2013 11:50 AM

If you’re reading this in the Gulf, the chances are that at some stage in the last year, you will have flown on one of the region’s low-cost carriers. And if — like me — you have ever experienced the joys of flying with Ryanair, you’ll agree that they are, by and large, pretty good.

Given the success of Air Arabia, Flydubai and co, it looks like there is still plenty of room for growth in the market, especially as new aircraft come into service. After all, the range of Boeing’s latest next-generation single-aisle aircraft, the 737 MAX, is such that a number of new destinations previously untouched by local LCCs could come into play. Theoretically, it should be possible for the region’s carriers to start serving locations as far apart as Milan and Berlin in Europe, and Chongqing and Bangkok in Asia.

Bearing in mind those new destinations, the huge population within that range, and the success so far of budget carriers in the Gulf, new players are perhaps inevitable. But who has the financing and expertise to launch a successful low-cost carrier, bearing in mind that even the best-run outfit will probably take as long as five years to make its first profit? Saudi Arabia’s SAMA and Bahrain Air both went bankrupt due to a result of a lack of funding or government intransigency.

The answer lies in the success of Flydubai. Launched just four years ago, the Dubai airline made its first profit last year, and already serves 52 locations. It seems like every week I receive a press release from Flydubai, announcing new flights to destinations I’ve never even heard of. Ufa, Osh and Mattala are now being served by Flydubai, while Air Arabia — not to be outdone — is planning to launch flights to Mineralye Vody (a spa town in Russia’s Stavropol Krai district, in case you didn’t know).

Although Flydubai officials are at pains to stress that the airline is a separate entity from Emirates, the relationship between the two is pretty close. They have the same chairman, and their destinations tend to complement each other. For example, Flydubai has only three destinations in India, a market in which Emirates is extremely strong. By comparison, Air Arabia flies to thirteen Indian airports. Emirates has only two destinations in the whole of Russia and the CIS (Moscow and St Petersburg), a region that Flydubai now considers its bread and butter, with twelve destinations and more in the pipeline.

That complementary model is one that the other Gulf carriers should, and probably will, follow. Etihad and Qatar Airways have proved more than proficient at mopping up long-haul traffic through their wide-body aircraft, and there is clearly money to be made from narrow-body, medium-to-short-haul passengers.

Qatar Airways, in particular, may feel that the time will soon be ripe for a budget carrier, given that the carrier posted a small loss in the last financial year, compared to “substantial” profits in the year before. CEO Akbar Al Baker has previously stated that the airline has an aircraft already set aside for this purpose, but given that Qatar Airways’ focus this year will be on opening its new hub at Hamad International, any move could take some time.

Similarly, over in Abu Dhabi, Etihad has been carefully cultivating its equity partnership. While that may be nearing a close, there has been little talk of a budget option.

So while those two carriers may be focused on other areas right now, don’t be surprised if you see Flyqatar or Etihad Express flights taking to the skies in the next couple of years.

Ed Attwood is the Editor of Arabian Business.

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