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AirArabia sees yield dilution, Jazeera expects 2009 profit and sees LCC consolidation ahead


Air Arabia CEO, Adel Ali, stated Middle East airlines are suffering more severely from yield dilution than carriers in other regions worldwide, due to excess capacity as a result of strong regional ordering, new market entry and the global economic downturn affecting passenger numbers.

Mr Ali told Emirates Business 24/7, “there has been an 18% yield dilution in the Middle East basically because the capacity is more than the demand at the moment because of the recession… This is more severe than the global average yield dilution of 12%. In the Middle East, the demand is growing, but not as fast as the capacity is growing. Also because demand is growing, it becomes an attractive place for other GCC carriers and international carriers”.

Jazeera Airways CEO, Stefan Pichler (formerly with Australia's Virgin Blue), meanwhile stated he expects consolidation to occur among the Middle Eastern LCCs, with the Kuwait LCC “highly geared” for potential acquisitions. Mr Pichler added that the LCC expects to report a full year profit in 2009, despite reporting losses of approximately USD7.6 million in 1H2009.

Following the statements, shares in AirArabia gained 0.8% on 12-Oct-2009, while Jazeera’s shares remained stable.

nasair close to breakeven

In other Middle East LCC news, nasair stated it is currently close to breakeven point and expects to reach this target in 2010. The LCC also aims to double the number of passengers to 1.5 million by the end of 2009 and expects to take delivery of approximately 30 more aircraft from the end of 2010, which, according to CEO, Walter Prenzler, “will be enough for the next five or six years”. 

Sama adding 20 more aircraft

Saudi rival, Sama, stated it plans to acquire 20 new B737-800 or A320 aircraft over the next four years, with CEO, Kevin Steele, stating that to survive as an LCC, “you’ve got to be a 20 to 25 aircraft company”. The carrier, which currently operates a fleet of seven B737-800s, plans to make a decision by the end of 2009.

AirAsia X targets Jeddah

Outside the region, AirAsia X CEO, Azran Osman-Rani, stated the carrier plans to further expand into the Middle East after the launch of Kuala Lumpur-Abu Dhabi service on 23-Nov-2009. The carrier plans to launch services to Jeddah in 2H2010, subject to regulatory approvals, while services to a third non-GCC destination may be launched in 2011.

Mr Osman-Rani told Reuters, "in the three-year horizon, we probably expect to add a couple of airports in the Middle East…Jeddah is a possibility. We would like to get Jeddah…I do think there's scope for a third [Middle East destination]. Probably not next year, but certainly beyond that…There is a lot of room [for a hub] in a non-Gulf, non-Saudi area. Assuming we get a good airport deal and get planes we would add a third destination in 2011".

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