UAE low-cost carriers could grow post-COVID-19

Hungarian ultra-low cost carrier Wizz made a bold statement when it said its Abu Dhabi investment remained a key priority. The comments from the airline may seem out of place at a time when flights are grounded due to the COVID-19 pandemic, but they reflect the anticipation that the UAE’s low-cost carriers (LCCs) could witness renewed demand and buoy local aviation demand in the once the pandemic becomes more subdued, says GlobalData, a leading data and analytics company.

LCCs have been steadily gaining a greater share of regional skies for a number of years. The CAPA Centre for Aviation said in December that the share of LCCs in the Middle East’s total seat capacity grew to 16.5% in 2019 from 14.9% in 2018.

Neha Bhatia, Construction and Infrastructure Editor at GlobalData, comments: “In the United Arab Emirates (UAE), full-service flag carriers Etihad and Emirates both cut capacities in 2019 due to lowered demand for travel in the region and structural changes afoot at the organizations. However, both airlines also reinforced their market share by deepening ties with LCCs during the year.”

Emirates and Flydubai entered a codesharing agreement in October 2017, and in the two years since, the airlines have carried more than 5.27 million passengers. Plans are in place to further optimise their operations, Sheikh Ahmed bin Saeed al-Maktoum, chairman of Emirates Group and Flydubai, said in October 2019.

Indian budget carrier Spicejet and Ras al-Khaimah (RAK) International airport also signed a partnership agreement that month. Together, they plan to launch a RAK-based airline that will operate as Spicejet’s first international hub, with the Indian carrier’s chairman and managing director Ajay Singh touting the new LCC as an affordable way of flying to Europe.

In the same month, Etihad and Sharjah-based Air Arabia announced plans to develop Air Arabia Abu Dhabi, originally scheduled to start flying in the second quarter of 2020. The carrier, Abu Dhabi’s first LCC, was awarded its operating license earlier this month, and will become the UAE’s fifth airline when it starts service.

Yet another LCC planned for launch in the UAE capital this year is Wizz Air Abu Dhabi, backed by Wizz and Abu Dhabi Developmental Holding Company.

Bhatia continues: “COVID-19 may change the launch timelines and operational plans of these carriers, but it is more likely to sway long-term spending interest towards the UAE’s budget airlines segment.

“Purchasing power is on the decline globally as individuals and businesses face financial disruption due to COVID-19. Much of the initial recovery in the aviation sector will come from the visiting friends and relatives (VFR) segment.

“The operational backing of local airport and full-service partners could help UAE-based LCCs grow as VFR travel demand soars in the post-pandemic period. For an industry with limited opportunities on the immediate horizon, this is an opportunity that is too good to ignore.”

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