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Regional airports 'should be open to competition'
Adel Ali is credited with successfully building Air Arabia into a major airline. Air Arabia listed its shares on the Dubai Financial Market last year.
- By Shakir Husain, Staff Reporter
- Published: 00:13 October 3, 2008
- Adel Ali, chief executive officer of Air Arabia, says the region is still in a state of denial when it comes to low-cost airlines.
- Image Credit: Supplied Picture
Sharjah: Adel Ali is credited with successfully building Air Arabia into a major airline. Air Arabia listed its shares on the Dubai Financial Market last year.
At the end of June this year, it had flown 10 million passengers since starting operations in October 2003.
Ali has more than 25 years of experience in aviation, tourism and marketing and has headed the region's first budget airline since its launch.
Before becoming chief executive officer of Air Arabia, he served as vice-president for commercial and customer service with Gulf Air.
Before that, he spent over 20 years with British Airways, where he held senior positions, including general manager for the Middle East and Africa. He holds an MBA degree from Marlhurst University in the US.
In an exclusive interview with Gulf News, Ali talks about key issues in the region's aviation sector.
The price of oil has declined in recent weeks. Do you feel under less pressure now?
Adel Ali: The price of oil going down is a welcome thing for anybody in the transport business, specifically for airlines. We feel a little less pressure but oil at $100 is still costly. Every dollar that the price goes up makes it more painful. What needs to be recognised is that the oil price quoted in the market is not necessarily the price you pay to buy oil that day. It has to be recognised that during the period when oil moved from $85 to $147, we were only able to increase ticket prices twice.
That is because of the complexity of revising prices. Now that the oil price has reversed, we want to see two things: stability of price and sustainability of this price over a period of time.
There are other cost pressures. Fuel is just the biggest one for the airline business. If the price stabilises, airlines will look at fuel surcharges and adjust them accordingly. Fuel used to be 33-44 per cent of our overall costs before, now it is more than 40 per cent. At $140, it is fair to say that 50 per cent of our cost is going to be fuel.
What is your route expansion strategy? Eventually, how many destinations do you plan to serve?
You will see continuous natural organic growth. Aircraft acquisitions are based on this strategy. We will be opening three new stations - Nairobi, Kiev, Hyderabad. We will not be doing long-haul routes because that is not part of our business model. By the end of this year, there are going to be 45 destinations. Our goal is to add five destinations every year.
Are you planning any new joint venture or tie-up, something similar to what you did in Nepal with FlyYeti.com?
We have a plan to set up an airline in Morocco. It will be our hub for North Africa and Europe business. The company we are tying up with is called Regional Airlines. We have a major share, but it is premature to give a specific number.
Are you going to place more plane orders for either Air Arabia or for this new venture?
We have 34 aeroplanes to be delivered. By the end of this year, we will be operating 18 aircraft of our own, and next year we will have 22 planes. So these, 22 in operation and 34 on order will be enough for the next few years.
There are air space constraints in the region. Is this congestion in the skies hampering airline growth?
It costs us money because we are spending more time waiting for landing and takeoff. There are a number of things that can be done. There can be a centralised GCC air control system like the way the EU has. Air corridors should be opened up.
How is the low-cost model faring and where do you see it in the future in this region?
We said five years ago that low-cost travel will become successful. We said that a number of people will copy us and start low-cost airlines, that has happened. Now there is Sama and NAS in Saudi Arabia, there is Jazeera in Kuwait, there is Bahrain Air. FlyDubai is another one and there will be many more after this. Low-cost airlines have facilitated travel for those who used to travel by road within the region. People are also travelling more frequently. That is why we are getting double-digit passenger growth.
With new airlines entering the low-cost travel business, do you see different classes developing within this segment?
If they want to make it more sophisticated than just a basic transport service, then they only want to confuse themselves. The bottomline is that the customer wants to pay the least and wants to get from point A to point B.
Why complicate the business? We want to remain a true low-cost airline. We are a private airline. We have 40,000 shareholders. We went to the market and said we take your money and make it better for you.
Which are the most important markets for you?
India is a good market although competition is increasing there. Egypt, Syria, Lebanon and intra-Gulf routes are doing well.
Wherever we go, we have good reasons to be there. If the route is not good, we work hard to stimulate travel there.
Three years ago, you would not have said Latakia was a good route. No airline went there, but today it is a good route. Assiut in Egypt would not have been considered a good route three or four years ago, but today it is good route. In Nagpur, Qatar Airways followed us.
Are you satisfied with the facilities available to low-cost airlines in the region and the places you fly to? Would you like to see facilities specifically tailored for budget airlines?
The region is still in a state of denial when it comes to low-cost. The region's airports and authorities still think low-cost travel is not a good thing. As a result, they charge low-cost airlines a premium for doing less for them.
We require the minimum services at airports, but we pay more than the airlines that require more services. It is unfair, but we cannot do anything about it because most airports are monopolies. I would like to see airports become true businesses and allow competition.
It is unfair to have competition among airlines, but not have similar competition among people who provide services for the airlines. If we want to have true development of tourism and air travel in the Arab world, we have to open up airport operations to competition. These are small changes but they can bring big returns for the overall economy.
Outside the GCC, do you get sufficient facilities in countries such as India and Pakistan?
Facilities there are worse. And they charge so much in US dollars. There infrastructure is lacking, here (in the Gulf) they are spending billion of dollars on five-star airports, while all people need is a simple terminal. Who pays for these airports? The people who use them, the airlines. I do not think people who build these airports listen to their customers. This is the case all over the Middle East and North Africa. Just look at the airports in Thailand, Singapore and Malaysia. These are the examples of good things.
Are you investing in any physical infrastructure in Morocco or elsewhere?
We are investing in a hotel at Sharjah Airport. It should be ready in 18 months. It will be managed by Rotana. We have a joint venture with Alpha catering. We are doing this because we need these facilities at our base, but we are not getting into the hotel business.
Are you happy with what the company has achieved and what you have done for the company? Is there anything you wanted to do and could not do for some reasons?
We have delivered everything that we intended to when we started five years ago. In a business there are ups and downs, but I am happy with the end result.
When people say something is not going to work, and then you see others following you, that is success to me. From 2 planes to 18 planes and 4 million passengers, that is success to me. Our competition is not just with low-cost airlines, it is with every airline in this region whether it is low-cost or not.
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