Dubai: Air Arabia said on Monday it has bought a 49 per cent stake in Jordan’s Petra Airlines, in a sign that the Gulf airline industry is maturing as it moves towards consolidation.
The move will see Jordan’s budget carrier being relaunched as “Air Arabia Jordan”, and Sharjah’s Air Arabia opening a new international hub at Jordan’s Amman Queen Alia International Airport, marking its fifth hub globally. The operations are due to commence under the new identity in the first quarter of 2015, according to Air Arabia.
In the first equity acquisition by a budget carrier in the region, the deal will see the existing principal shareholder of Perta Airlines, RUM Group, maintaining a 51 per cent stake in the airline, Air Arabia stated.
The airline, however, did not divulge the value of the deal.
Asked if the move marks the beginning of consolidation the Gulf airlines industry, Addison Schonland, co-founder and partner at US-based aviation consultancy, AirInsight, said: “This could be the case but it’s early days. Industry consolidation is a maturing process that will continue in the airline sector.” He added that Dubai-based budget carrier, flydubai, “clearly should be watched for a move”.
So far Abu Dhabi-based Etihad Airways has been the only airline in the region to aggressively follow the model of growth by the way of equity acquisitions. “Etihad’s example has been very interesting. It likely acted as a model for Air Arabia. However, Etihad’s success in financial terms has yet to be seen. But the Air Arabia model seems more simple and regionally focused,” Schonland told Gulf News.
Echoing similar views is John Strickland, UK-based aviation analyst and Director of JLS Consulting. “Air Arabia has a successful business strategy across pan region bases. It has already seen the opportunity to replace the activity of RAK Airways in Ras Al Khaimah, and Jordan is another market which has long been intended for further development by the company,” he pointed out.
Strickland, however, does not see a wholesale move to stake acquisitions by Air Arabia. “This will be done on a very selective basis where it is coherent with the airline’s broader business strategy of organic growth,” he said.
According to Ernest S Arvai, Partner at US-based AirInsight, some consolidation is necessary for survival in the near future for some operators in the region. “Etihad has focused more on Europe for growth, while Emirates has remained focused on organic growth, and Qatar Airways, apart from its joint venture in Saudi Arabia, is looking towards IAG in rumoured JV talks. While we foresee a consolidation trend as likely, this will occur slowly over the next decade,” he said.
The Dubai Financial Market-listed Air Arabia currently operates services from operating hubs in Sharjah, Alexandria (Egypt), Casablanca (Morocco) and Ras Al Khaimah.
Shares of Air Arabia ended 0.67 per cent lower on Monday at Dh1.48.
Shaikh Abdullah Bin Mohammad Al Thani, Chairman of Air Arabia, stated that the establishment of a new hub in Jordan extends the airline’s operational footprint into the heart of the Levant while also providing the Jordanian economy with strong growth through “direct contributions to the local economy”.