Sharjah-based Air Arabia’s winning strategy is about joint ventures and new airlines

Dubai: After Abu Dhabi, where next?

The Sharjah-based Air Arabia's didn’t take long to answer that one – the budget airline is now heading for Armenia to launch its next joint venture. The move, according to industry experts, would have been a no-brainer.

The deal will see an independent joint venture company operating as a low-cost passenger airline with Yerevan’s Zvartnots International Airport (EVN) as its base. Armenia is a "large emergent market" with "no really established airline in play," said John Grant, Partner at Midas Aviation.

Being "well-located between Central Asia and Europe, it is potentially a good location for any carrier, especially one with low-cost [aspirations]."

The UAE airline is tying up with Armenian National Interests Fund (ANIF) to launch the airline.

A winning strategy

Entering a joint venture to launch a new is nothing new for Air Arabia, which launched its Abu Dhabi operations last year through a new airline in alliance with Etihad Airways. Incidentally, Air Arabia Abu Dhabi marked its first year of operations on Wednesday (July 14), which is also when the Armenia announcement was made. The Abu Dhabi airline has expanded its network to 15 destinations.

The new carrier will serve the "strategic vision of Armenia’s fast-growing travel and tourism sector as well as contributes to the country’s economic growth," said the joint venture partners in a statement. "This builds on our commitment to partner with top global entities on transformational projects that catalyse our crucial economic sectors," said David Papazian, CEO of ANIF.

"Air Arabia has a well-established track-record in launching and operating successful LCCs (low cost carriers), and its knowhow will be a differentiating strength of the new airline."

Advantage time

Low-cost carriers are expected to see a faster revival than other airlines thanks to the competitive fares. An "LCC with a lower cost structure has an advantage because you will need some level of inducement of travel demand in the immediate recovery phase," said Bryan Foong, chief strategy officer, Malaysia Airlines.

"Prices and low cost structures are going to be something that's going to be very important for airlines during recovery," said Foong, during a recent CAPA (Centre for Aviation) event.