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Air Arabia to Open Third Hub by March

Although Air Arabia had previously announced its plans for a hub in Alexandria, the comments on Monday by its Chief Executive Officer Adel Ali were the first by a senior company executive to provide approximate timing for the facility to begin operations.

Air Arabia’s Egyptian hub will fill a gap in the carrier’s coverage of the Middle East and North Africa and make it a truly “pan-Arab” airline, Ali told an aviation conference in Al Ain.

Just as it did at its existing hubs in Sharjah and Casablanca, Morocco, Air Arabia plans to start service at Alexandria with two aircraft and then gradually add more planes as it expands its route network to cities in Europe, Africa and the Middle East. Air Arabia operates 16 Airbus A320s and has an additional 44 of the narrow-body aircraft on order.

Ali acknowledged that Air Arabia, like other low-cost carriers, or LCCs, has suffered this year from the combined effects of the recession and a steady increase in regional airline capacity.

“It has been a challenging year. Given the circumstances… I think (the carrier’s performance) has been good. The current market sentiment is showing (a) more positive (trend). I’m not pessimistic,” he told reporters on the sidelines of the conference.

One measure of the challenge is a dilution in passenger yields. Ali said that yields for Middle Eastern carriers overall have decreased by around 18 per cent so far this year from 2008 levels, whereas yields for the global airline industry have slumped by a more modest 12 per cent.

Ali declined to be more specific about his financial outlook for 2009. Air Arabia has earned a profit in each of the last five years.

In a positive development, Ali noted that Air Arabia now attracts the sort of traveller who, in the past, might have flown in business class on a full-service airline.

“There are more people with laptops and Blackberries getting on to our planes now… which is not our typical LCC customer.”

He added that he sees ample room for budget carriers to expand in the Middle East. LCCs account for 5 per cent of the travel market in this region, compared with more than 20 per cent in both the US and Europe.

Ali argued that an expansion in market share will be the key to success for any budget airline in this region.

“This is a market share game… In the hotel industry, executives, every day, they dine together. This is the airline industry. In the evening, they think (about) how they can kill each other.”

· bruce@khaleejtimes.com