UAE and Gulf's budget airlines could lead short-haul demand recovery
Play it right and there is more they can gain in post-COVID-19 aviation marketplace
The emergence of low-cost carriers (LCC) has been a global phenomenon for some time. Through the years, such airlines in Europe and the US have had tremendous growth, and yet in the Gulf they have only begun that growth path more recently.
The GCC is situated within eight hours of two-thirds of the world’s population. This region has limited to no domestic air market, except in Saudi Arabia. The geography thus makes it the perfect location to set up LCCs that can attract passengers regionally and across most of the eastern hemisphere.
Perfect timing
According to data, LCCs in the Middle East are now driving a 9.3 per cent growth in seat capacity. As government restrictions ease and markets open up again after COVID-19, the initial recovery will be led by VFR (visting friends and relatives) travel. Low-cost carriers are best positioned to benefit from the recovery process, which will be led by domestic/international short-haul flights.
International markets will face the slowest recovery, creating potential growth for LCCs and with the operational backing of full-service carrier partners. This could potentially help LCCs grow as VFR travel demand soars.
Slow return
Inevitably, demand is going to exceed capacity available, which means there will be a rise in fares. Low-cost carriers will still be the most attractive market option, due to their low operating cost model based on having a standardized fleet, no frills, and rapid turnaround times to raise fleet efficiency.
Also, airlines that relied heavily on transferring passengers as their key to growth will struggle as point-to-point options will become more attractive. Low-cost carriers in the Gulf operate are therefore less exposed to the dynamics of long-haul markets with transfer connectivity, which were the first to be grounded in the first quarter of 2020 after the pandemic broke.
A large portion of that has remained inactive to date due to government restrictions and high levels of complexity. Considering that, the biggest issue for passengers at the moment is the amount of personal space they can maintain at airports... and even on the plane.
More mindset adjustments
Passengers in the GCC are just as price-driven as other consumers in Europe. LCCs’ cheaper prices will attract leisure passengers to shift from other carriers. Cultural perception may lead individuals to associate LCCs with poor quality and hesitate to use them.
LCCs may in due time get them to change those views, which in return would increase demand for airlines such as Air Arabia and Flynas. They have shown that LCCs in the GCC remain a buoyant alternative. Flydubai has quickly adapted to consumer needs and cultural perceptions by moving towards a more hybrid model, with business class seats.
Although the shocking figures of 2020 affect the whole industry, LCCs in the Gulf have proven more adaptable. Change has become a necessity for survival of an airline.
- Rania Bisher Hanbali is a Consultant at Bauer Aviation Advisory.