Air Arabia, UAE

As the first low-cost carrier (LCC) in the Middle East & North Africa, Air Arabia only knows too well the remarkable growth opportunities of this sector. “Since we started almost five years ago, we’ve been able to revolutionise the air travel industry in this part of the world,” says Board Member and CEO, Adel A. Ali. “We’ve created a new niche market offering superb value for money with 40 to 50 per cent less than market rate along with safe and reliable operations.”

Travellers have welcomed the new concept with open arms. Air Arabia commenced operation in October 2003 with two aircraft flying to five destinations. Today it serves over 39 destinations in the Middle East, North Africa, South Asia, Indian Subcontinent, CIS and Europe - and is adding an average of four to six new destinations each year. The airline is also expected to grow its fleet to over 50 aircraft by 2015 from current fleet of 15 new Airbus A320s aircraft.

The figures speak for themselves. Air Arabia was able to achieve financial break even point from first year of operations and record a double digit growth since then. Early in 2008, Citigroup issued a coverage report identifiying Air Arabia as one of the world’s most profitable and fastest growing airlines. “Our net profit in 2007 was AED376 million,” confirms Ali. “This is up 272 per cent compared to AED101 million in 2006.”

The Airline is currently in expansion mode. Operating out of Sharjah International Airport - its primary hub – Air Arabia recently commenced operations from a new hub in Katmandu, Nepal by launching Nepal’s first Low Cost Carrier (LCC) flyYeti.com connecting passangers from this region to further destinations in Asia and the Far East. The company is also planning to open another hub in the capital of Morocco, Rabat later in the year.

In March 2007 Air Arabia offered 55 per cent of its capital for initial public offering. The AED2.5 billion IPO included over 40,000 local and international investors and marked Air Arabia as the first publicly owned airline in the Arab world.

Clearly, the potential for expansion in the region accentuates the differences in demand between low-cost carriers here and elsewhere in Europe and the USA. The Middle East aviation market is growing at a double rate compared to the World’s aviation growth and still, LCC market penetration in this region is below 2%, compared to 11% and 25% in Europe and US respectively. Air Arabia is considered the biggest airline to serve India amongst all other Middle East Airlines by offering flights to 15 different destinations across the Indian subcontinent. For instance, “India is a huge market for all airlines - and we’ve entered the market in a big and different way, offering services to nonmetro cities,” Ali comments. “The Levant also holds big opportunities.” As for the airline’s main customer base, “It’s a real mix of expatriates, families, students and business people,” he remarks.

Air Arabia Holidays brings you exciting holiday promotions and experiences with mini-breaks from the UAE to regions in the Middle East, North Africa, Indian Subcontinent and CIS countries. Week-end escapes are now very much affordable as Air Arabia offers unique and customized holiday packages with a wide range of three to five stars hotels. Instead of spending week-ends in your town, you can now easily be in a new country every week!

How do low-cost airlines such as Air Arabia manage to operate with such reduced airfares? Also described as ‘budget’ or ‘no-frills’ airlines, low-cost carriers is a smart business practice where costs are reduced and passed by to customers through cheaper air fares, simply by efficient business practices such as short-haul destinations, operations to secondary airports, established and effective distribution network (web based), one type of aircraft and optional but affordable customer in-flight services such as food and beverages.

“The low-cost concept doesn’t mean that you have to work on tight profit margins. It means doing business in a more efficient way, explains Ali. “The business model should be mature enough to adapt to changes in the market.”

One way that Air Arabia has streamlined its operations is by running a young fleet of single-type of Airbus A320 aircraft. This minimises maintenance costs, plus enables crew training and resources to focus on one product. Electronic ticketing and faster turnarounds at each airport enable further efficiency of resources. Neither does low-cost equate discomfort. Air Arabia claims the most legroom of any economy class in the region.

In Europe however, some budget airlines have recently come under scrutiny as the optional extras may result in bumping up the price so much that they are no longer competitive with other airlines. Passengers may expect to pay an additional amount for each piece of luggage, an assigned seat number and payment by credit card - as well as the usual in-flight extras.

“The service must be customised to meet local preferences. What works in Europe may not work in the Middle East,” counters Ali. “Air Arabia customers do not pay for luggage and there is no priority seating. The only extra is food at what we believe to be an affordable price. Of course customers must evaluate any additional costs that may be involved. But at the end of the day, low-cost carriers offer customers the choice.”