Air Arabia
Air Arabia has jets on order even as it goes ahead with new airlines in Pakistan and Armenia. That its Pakistan venture will also tap domestic services could be decisive. Image Credit: Gulf News Archive

Dubai: UAE’s budget airline Air Arabia could not have better timed its plans to launch a new carrier in Pakistan.

"Pakistan has been one of the key markets for Air Arabia over the past decade – so, the timing is appropriate to spread its wings further," said Linus Benjamin Bauer, Managing Director at Bauer Aviation Advisory. "Air Arabia's solid fundamentals before and during the pandemic is one of the key advantages for the carrier's ambitions."

Air Arabia and the conglomerate Lakson Group will form a joint venture to launch 'Fly Jinnah', Pakistan’s newest airline. The low-cost airline will serve domestic and international routes from Pakistan.

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Huge on potential

With a population of around 217 million people, Pakistan could potentially be a large domestic market - but not anytime soon if experts are to be believed. It's current domestic volume of 4 million seats in 2019 meant just 0.02 seats per person, which is "very low", said James Pearson, an aviation analyst.

India, with a population north of 1 billion, fares better with 0.12 seats per person. Pearson argues that while there is space for one more low-cost operator in the Pakistani market, the fact that just two routes - Karachi-Lahore and Karachi-Islamabad - represented 56 per cent of seats in 2019, shows domestic air travel in the country still has a long way to go.

A new airline will also face stiff competition from current low-cost market leader Airblue, which recently launched flights connecting Ras Al Khaimah to Lahore.

Aircraft in hand

Before the pandemic, Air Arabia placed a $14 billion order for 120 Airbus A320 family aircraft. The deal aimed to more than triple Air Arabia’s fleet strength as well as support the network expansion strategy.

Its profit more than doubled to Dh44 million for first six months ending June 30. "Air Arabia’s ability to post a profitable first-half 2021 is a direct result of the cost control measures adopted by the management team and supported by the gradual resumption of operations,” said Sheikh Abdullah Bin Mohamed Al Thani, Chairman of Air Arabia.

Helps being flexible

While the pandemic erased global travel demand, airlines like Air Arabia and Wizz Air have actually used this lull in the market to their advantage. Air Arabia Abu Dhabi, a joint venture with Etihad Airways, took to the skies in July last year with an inaugural flight to Egypt.

Less than a week ago, Air Arabia announced that it was going to apply for an operational license for its new Armenian airline called 'Fly Arna'. In July, Air Arabia said it was tying up with Armenia’s investment fund to launch Armenia’s new national airline.

Etihad steps back

While Air Arabia sets up subsidiary airlines, Abu Dhabi-based peer Etihad is scaling back its ambitions. Etihad was impacted by a "failed quasi-alliance strategy whereby the means through which we pursued an accelerated growth path was equity participation in a number of other airlines," said Tony Douglas, the airline's CEO during a Simple Flying webinar last week.

"That strategy failed, and as a consequence we had to completely restructure the balance-sheet, (and) redesign the operating model of Etihad."

Etihad has exited some of its stakes in those airlines and become a mid-sized carrier.