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nasair ceases operations to India as its narrowbodies prove no match for competitors’ widebodies

16-Feb-2012

Saudi Arabia’s nasair has ended its operations to Kozhikode, the carrier’s sole remaining destination in India. The airline suspended its operations from Riyadh to Kozhikode from the beginning of Feb-2012, although no official announcement regarding the cancellation was made.

The cancellation of its final route into the country marks a major reversal in strategy for the carrier. After several years of experience with Hajj pilgrimage flights to Mumbai and Kozhikode, nasair launched scheduled services to India at the end of Mar-2010, with a four times weekly Riyadh-Mumbai service. The carrier followed this up by adding services from Riyadh to Kochi in Jun-2010, Kozhikode in Oct-2010 and Delhi during Dec-2010.

nasair route expansion to India

Destination

Launch date

Weekly frequency

Mumbai

31-Mar-10

4

Kochi

01-Jun-10

3

Kozhikode

04-Oct-10

4

Delhi

02-Dec-10

3

Now, just 18 months later, all Indian operations have ceased and the carrier’s operations to Pakistan have also undergone a recent reduction.

Potential in India unrealised

India appeared to be a promising cornerstone market for the Saudi Arabian LCC. The airline was initially very bullish about prospects for growing traffic in the market, saying it saw huge demand. Saudi Arabia has an Indian expatriate population of around 1.8 million – the largest in the GCC – offering strong labour and VFR traffic potential.

Indian expatriate population in GCC nations

Bahrain

350,000

Kuwait

579,390

Oman

557,713

Qatar

500,000

Saudi Arabia

1,789,000

UAE

1,702,911

nasair said it would also target business travellers between Saudi Arabia and India, capitalising on the growing commercial ties between the two countries. nasair also sought to target tourists from Saudi Arabia seeking low-cost airfares into India.

nasair’s domestic connections to Medinah and the rest of Saudi Arabia also offered the prospect of strong pilgrimage traffic. Prior to the launch of scheduled services to India, the airline operated several years of dedicated pilgrimage flights to India. It handled more than 50,000 Indian's pilgrims during the 2009/10 Hajj pilgrimage period and forecast that its Indian pilgrim traffic could reach 90,000 by 2010/11.

By early 2011, the airline was operating 14 weekly frequencies to its four Indian destinations, with promising initial signs. Although relatively low-yielding labour travellers dominated passenger make-up, the airline reported average passenger load factors of 86% on Riyadh-Mumbai service over the first nine months of operation and 70% on Riyadh-Kochi service over the first six months. The carrier was also talking to Indian LCCs and full-service carriers about codeshare relationships and looking at Hyderabad and Mangalore as potential future destinations.

The entry of nasair into the Indian market also broke up a number of cosy duopoly routes. Prior to nasair’s entry, the Riyadh-Kochi, Riyadh-Kozhikode and Riyadh-Delhi routes were split between Saudi Arabian Airlines and Air India. The full-service carriers offered only relatively low frequency operations, but compensated by operating high-capacity widebody aircraft including Boeing 747s, 777s and Airbus A330s. Gulf carriers like Emirates also operated one-stop widebody services, which translate to lower unit costs and more competitive fares compared to nasair’s narrowbody operation.

Subsequently nasair cut back its Mumbai service to three times weekly and then cancelled services from Riyadh to Delhi and Mumbai in May-2011. Operations to Kozhikode were at one point built up to 10 times weekly, but had been slowly cut back to half that prior to this month’s suspension.

Top 10 largest carriers ranked on seats between the Middle East and India: 13-Feb-2012 to 19-Feb-2012

Rank

Airline

Total Seats

1

EK

Emirates

105,036

2

AI

Air India

66,962

3

9W

Jet Airways

51,370

4

IX

Air India Express

41,202

5

QR

Qatar Airways

37,037

6

G9

Air Arabia

33,696

7

WY

Oman Air

23,168

8

SV

Saudi Arabian Airlines

22,962

9

EY

Etihad Airways

15,090

10

GF

Gulf Air

11,944

Advance and retreat in Pakistan

While nasair was retreating from India, it was also showing a renewed interest in Pakistan. In mid-2011, the airline added services from Riyadh and Jeddah to Karachi, Islamabad and Lahore in a flurry of new route activity.

nasair route expansion to Pakistan

Route

Launch date

Weekly frequency

Riyadh-Karachi

18-Jun-11

7

Jeddah-Karachi

18-Jun-11

7

Riyadh-Lahore

08-Jul-11

4

Jeddah-Lahore

08-Jul-11

4

Riyadh-Islamabad

14-Jul-11

4

Jeddah-Islamabad

15-Jul-11

3

Operations to Pakistan share many similarities with those to India. Both have strong expatriate populations in Saudi Arabia – around 1.5 million in the case of Pakistan – and both have strong pilgrimage traffic.

An estimated 1.7 million Pakistanis travelled to Saudi Arabia in 2010, more than 160,000 during the Hajj period alone. Nasair, along with Pakistan’s Shaheen Air, were recently granted special permission to operate Hajj services to increase competition in the market that had traditionally been restricted to national airlines and special charter carriers.

Competition is also similar to that on India-Saudi Arabian services, although the Pakistan-Saudi Arabia market faces less competition from one-stop Gulf carriers. Prior to nasair’s entry into the market, only Saudi Arabian Airlines and Pakistan International Airlines operated between the two countries.

Pakistan-Saudi Arabia capacity (seats per week): 13-Feb-2012 to 19-Feb-2012

Rank

Airline

Total seats

1

PK

Pakistan International Airlines

10,874

2

SV

Saudi Arabian Airlines

9042

3

XY

NAS Air

3960

Unlike Indian operations, destinations in Pakistan are more comfortably in the A320’s operating envelope, with flight times around three and a half to four and a half hours, instead of five hours to India.

However, nasair is beginning to pull back in Pakistan. It has suspended its routes to Karachi, leaving Lahore and Islamabad as its only destinations in the Indian sub-continent. The carrier is reportedly assessing whether it can resume Lahore operations in the future, possibly with seasonal routes.

More competition to come for nasair

Looming in the background is Saudi Arabia’s decision to open up its aviation market with new operating licences, which will be available to foreign carriers. The newly independent Saudi Arabian General Authority of Civil Aviation (GACA) announced in Dec-2011 that it would seek applications from both Saudi and foreign airline companies, as well as foreign investors, for licences to operate domestic and international flights from Saudi airports.

Foreign carriers would be legally prevented from controlling a majority of traffic on domestic routes while “licensed airline companies” will be able to operate international flights within the limits of existing Saudi bilateral agreements. The GACA began accepting tenders on 23-Jan-2011 and the process will close at the end of Mar-2012. Requests for proposals from accepted candidates will be made in Apr-2012, along with more details and specific conditions for winning the licence.

No GCC carriers have formally announced that they are interested, although there have been reports that Emirates and Gulf Air have expressed interest in a licence to the GACA. The authority said last year that it expects the Saudi aviation market would be an attractive proposition for regional LCCs. A number of Saudi investors have also reportedly submitted tender documentations. Key will be how Saudi Arabia addresses two problems that have disadvantaged competition and even seen one carrier – Sama – go out of business. First is the fuel subsidy for national carrier Saudi Arabian and the second is a cap on domestic fares.

See related article: Saudi Arabia to take the plunge and open domestic market

The experience in India and Pakistan, as well as regional shakiness that could lead to instability in Syria especially, will see nasair approach 2012 cautiously, favouring consolidation and strengthening existing services where practical and profitable. When growth opportunities present themselves, nasair will look to expand – it operates 16 narrowbodies with a further 27 on order – but for now the carrier’s message is one of caution and steadiness.


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