UAE budget airlines stand to gain in return to Qatar skies
THEIR LOWER COST STRUCTURE WILL GIVE THEM DECISIVE PRICE ADVANTAGES
The UAE’s budget airlines — Air Arabia and flydubai— can be early winners in any resumption of flights to Doha, and which will also come in handy in their post-pandemic revival plans.
Both UAE carriers had high frequencies to Doha before the Qatar blockade from 2017. “Given that these two have significantly lower operating costs versus the three big players — including Qatar Airways — this advantage is going to clearly favour UAE’s low- cost carriers as the preference to fly to Doha,” said Linus Bauer, Managing Director at Dubai- based Bauer Aviation Advisory.
“The lifting of the Qatar blockade will boost traffic to and from the UAE and help UAE airlines to reduce dependency on transfer connectivity via their hubs.”
As of now, UAE carriers have not given a firm deadline on when they plan to resume services to Doha. ( It was last week that the UAE confirmed all transport links with Qatar will be restored as part of the Al- Ula agreement.)
Low- cost leader
Air Arabia, the Middle East’s biggest budget carrier, was doing particularly well before the pandemic, and even pulled out record net profits of Dh1 billion in 2019 — up 80 per cent from 2018. Despite the ongoing Covid- 19 related crisis, Air Arabia’s CEO said the airline had no plans to defer aircraft deliveries.
Last year, the Sharjah- headquartered carrier placed a $ 14 billion order for 120 Airbus A320 aircraft to support its network expansion strategy. These are expected to be delivered in 2024.
“We have not spoken to Airbus yet, because there is no need to,” said Adel Ali, Air Arabia’s CEO during a virtual event in November. “I personally believe the market will recover much faster — as soon as we find a vaccine, or a treatment people will want to get out and travel.
Boeing MAX issues
Air Arabia’s smaller peer flydubai returned to profitability in 2019 — but its top- line took a hit due to the grounding of its Boeing 737 Max aircraft following two crashes involving Lion Air and Ethiopian Airlines.
At the time, flydubai was one of the largest 737 MAX operators in the world, with 14 of these narrow- body aircraft and 250 on order.
Regulators are now lifting the ban on the Boeing airplane;
UAE’s General Civil Aviation Authority is also considering the return of the 737 MAX, it said in a recent statement.
“We are aware of the latest update from the Federal Aviation Administration ( FAA),” a flydubai spokesperson told Gulf News in November. “We will continue to work closely with our regulator and follow the directives issued,”
A re- launch could help flydubai regain its market share, but it will be a completely different environment it will be flying into.
“Re- lauching an aircraft like the 737 MAX during the pandemic will be indeed a tough challenge in short- term,” said Bauer.
“Next to all legal and technical aspects, future passengers need to be convinced to fly 737 MAX again — because customer confidence in air travel in general is at a very low at the moment already.”
With no low- cost airlines of its own, Qatar Airways will be unable tomatch the lower operating costs or pricing of budget airlines.
Taking on
UAE’s budget airline duo — Air Arabia and flydubai — will have no trouble taking on Qatar Airways, sources add.
“With no low- cost airlines of its own, Qatar Airways will be unable to match or beat the lower operating costs or pricing of the likes of AirArabia and flydubai — both of whom are customers and operators of newer A320neo’s and 737 MAX,” said Saj Ahmad, chief analyst, Strategic Aero Research.
“This gives the UAE airlines a huge competitive advantage thanks to their loyal following. So, if anything, the real winner out of this scenario, not just for now, but for the future too, will be UAE airlines.”