Dubai: When the aviation industry is going through its worst crisis, one would expect airlines to take a step back and focus on cutting costs. However, the opposite seems to be happening with European budget carrier Wizz Air, which recently launched a low-cost venture in Abu Dhabi amidst record-low travel demand.
“If we look at 10 major airlines and look at the way at the end of 2019, the level of debt they had and the level of debt they have now, a year later, is absolutely breathtaking,” said Peter Morris, Chief Economist at Cirium, speaking at the Arab Aviation Summit being held in Ras Al Khaimah. “But in the middle of that you can actually see an element of opportunity.”
Budget carriers like Ryanair, EasyJet and Wizz Air have taken on less debt compared to some major airlines. For instance, US-based Delta Air Lines saw its debt increase by $13.17 billion over the last year; Wizz Air’s debt only grew by $830 million during the same period.
JetBlue strategy
The US budget carrier started out after 9/11, and nobody expected it to succeed during a time when air travel confidence hit a whole new low. “And yet today is still there, because it meant that their competitors weren't able to drive them out of business,” said Morris.
Well suited
Apart from being a short-haul carrier with a low-cost strategy, Wizz’s fleet of narrow-body aircraft - made up of A320s and A321s - is better suited to the current market and its demand patterns. This allows the carrier to offer starting fares of Dh149 to fly from Abu Dhabi to destinations in Europe.
On top of the cheap flight tickets, the carrier also offers discounts from time to time. Most recently, Wizz Air said it was offering 5,000 tickets at a discounted rate of Dh99 for four destinations from Abu Dhabi. These are to Alexandria, Athens, Almaty and Nur Sultan.
Others will benefit
Sharjah’s flagship carrier Air Arabia and flydubai are also seen as early winners in any recovery in air travel demand. Air Arabia was doing particularly well before the pandemic, and even pulled out record net profits of Dh1 billion in 2019 – up 80 per cent from 2018. Despite the ongoing COVID-19 related crisis, Air Arabia has cited that it has no plans to defer aircraft deliveries.
Now, its joint venture with Abu Dhabi’s Etihad airways – Air Arabia Abu Dhabi – is quickly establishing air routes to ethnic markets like Nepal and Bangladesh. UAE’s lifting of a ban on the Boeing 737 MAX is expected to favor flydubai, which is one of the world’s biggest MAX customers. The budget-carrier currently has 11 Boeing 737 MAX 8s and 3 Boeing 737 MAX 9s in its fleet.
