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Sun 17 Nov 2019 03:41 PM

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Aviation experts cautious on Spicejet's planned UAE expansion plans

Tobias Ruckerl fears opening of hub in northern emirate could leave Indian budget airline 'isolated'

Aviation experts cautious on Spicejet's planned UAE expansion plans

Operations from the UAE will start in December with a Boeing 737 Next-Generation aircraft flying between New Delhi and Ras Al Khaimah (RKT).

For Ras Al Khaimah, it was the next natural step in its ambitious plans to further its plans to grow as a tourist destination.

Spicejet's proposals to not only develop Ras Al Khaimah as a hub, but to establish an airline in the emirate, caused more than a stir in the region's aviation industry.

The RAK Destination Strategy 2019-2021 reported record numbers in August this year, with most international visitors coming from Russia, Czech Republic, India, Poland and Kazakhstan. 

While the figures are impressive, industry experts are cautious about the Indian carrier's move to establish a new carrier at RAK International airport, which are already serves as a hub to Air Arabia.

Tobias Ruckerl, CEO of London-based Advanced Aviation Consulting (ADAVCO), has called the move by SpiceJet “brave”.

Operations from the UAE will start in December with a Boeing 737 Next-Generation aircraft flying between New Delhi and Ras Al Khaimah (RKT).

Spicejet will operate five flights a week and aims to gradually increase the frequency.

But Ruckerl told Arabian Business: “Considering the ambitious plan to use the UAE as a hub, especially into Europe, I think that this decision is brave.

“While Emirates/Flydubai and Etihad/Air Arabia Abu Dhabi operations have, or are going to have, a symbiotic-like cooperation, allowing them to offer connection flights between the airline and thus feeding each other at the existing hubs, SpiceJet will have to rely on its only capabilities to fill their aircrafts at RKT.

“That means that they won’t have the possibility to offer connecting flights with other airlines and my estimation is that they will be isolated at RKT airport.”

Ras Al Khaimah is around 90km from Sharjah, 114km from Dubai and 250km from Abu Dhabi.

Spicejet chairman and managing director Ajay Singh also told media at a press conference that it is their intention to base a new airline from the airport in the northern emirates.

“We are looking to establish an airline locally based in Ras Al Khaimah,” he said. “We are applying for certification shortly and the approval will take around three to six months. The new airline will help connect India with Eastern and Western European destination using RAK as hub.”

It will be the sixth airline to operate from the UAE after Emirates airline, Etihad Airways, Air Arabia, Flydubai and the recently-announced Air Arabia Abu Dhabi.

Scope to grow

John Strickland, director of JLS Consulting, told Arabian Business: “This is an interesting development. There is still scope for LCC's to grow the market in the Gulf but what I'd expect Spicejet to focus on is their strength in the Indian market.

“With over 10 million Indians in the Gulf, demand is phenomenally high and Spicejet may be able to leverage their market position differently by having a Gulf base as compared with their current ex-India product.

“It also provides them with a potential opportunity to diversify their activity.”

SpiceJet carried 4.04 million passengers in the quarter from July to September this year, grabbing an 11.5 percent market share.

While the carrier’s latest results from April to June this year revealed a total turnover of $444 million and a profit of $36.8m.

John Grant, senior analyst at OAG, expressed concerns about the sustainability of having six airlines, including four budget carriers – Flydubai, Air Arabia, Air Arabia Abu Dhabi and any new entity – operating in the same country.

He said: “Historically such ‘growth spurts’ in new entrants ends over time to lead to a period of consolidation. In the short-term it will probably lead to some very competitive fares in the market; great for the traveller in the short term but sustainable from a business perspective...?”

While Ruckerl agreed that it was good news for passengers, although he does not expect it to impact neighbouring airports in the emirate.

“The new airline from SpiceJet will surely be a competition, putting certain pressure on the market, but I doubt that it will affect the market that much; provided they stay at RKT and do not move on to Sharjah or even Dubai or Abu Dhabi. That might change the situation then,” he said.
“The RKT airspace is not that congested than the one of Dubai or Abu Dhabi, that would be surely an advantage.”

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