Jazeera Airways

Jazeera Airways and Air Arabia stick to their models and report double-digit increases in profits

Business is booming for LCCs in the Middle East. The two oldest low-cost airlines in the region – Air Arabia and Jazeera Airways – have both reported profitable first quarters, as the regional political environment cools and oil prices begin to trend back from their highs earlier in the year.

Both airlines have positive outlooks for this year. Jazeera Airways just reported its seventh consecutive quarterly profit – a record run of profitability for the airline – and aims to continue the success with its new strategic management plan (STAMP). Air Arabia achieved a double-digit increase in profit during the first quarter and the carrier plans to continue to enter new markets and launch new business ventures this year.

LCCs grab 10% of seats in the Middle East, but growth is slowing

The LCC phenomenon in the Middle East is entering the home stretch of its first decade. The importance of the LCC market in the Middle East has grown steadily since the launch of the region’s first LCC flights by Air Arabia in Oct-2003, but the growth has not been as high as initially anticipated, as carriers can attest to.

Just four airlines make up the regional LCC market – Air Arabia, flydubai, Jazeera Airways and NAS Air. Air Arabia also has two subsidiary carriers – Air Arabia Maroc, launched in 2007, and Air Arabia Egypt, launched in 2010. A third, based in Jordan, has been on hold for several years.

There are also some smaller carriers in the region that are filling the gap between LCCs and full service airlines. Bahrain Air markets itself as a “premium value” carrier, including some LCC elements in its model but also offering two seating classes – including an all-new business class cabin – and a correspondingly greater emphasis on service and product levels. RAK Airways, based in the UAE emirate of Ras Al Khaimah, also has low cost elements, but like Bahrain Air has adopted a hybrid model between full service and low-cost airlines.

Middle East regional carriers have profitable outlook for 2012

IATA’s latest 2012 industry forecast has airlines in the Middle East as the big winners, with the annual profit forecast for the region's airlines revised from USD300 million to USD500 million. It does come with a caveat though: a spike in oil prices could turn the forecast profit into a USD200 million loss for the region’s airlines.

In 2011, airlines in the Middle East reported a combined annual profit of approximately USD1 billion, according to IATA’s estimate. Despite the regional disruptions and spiralling price of oil, passengers in the region kept flying and Middle Eastern carriers increasingly developed their links with the rest of the world.

As they have been for years, financial results for Middle Eastern carriers were unevenly spread across the region.

Air services expansion to Iraq accelerating this summer

Another round of new routes to Iraq is occurring over the next few months, continuing the wave of expansion by international carriers as the country's economy develops and trade links grow. After almost two decades of limited activity, commercial aviation is playing an important role in the redevelopment of Iraq.

Between the early 1990s and 2000, Iraq was faced with heavy international sanctions, effectively preventing commercial travel. Royal Jordanian was the first international carrier to resume operations to the country, initially operating irregular cargo and charter services and then an on-again, off-again scheduled passenger service. It was only after the fall of the Hussein regime in 2003 that commercial airlines began to return to the country in any numbers.

What began as a trickle of airlines and a handful of routes become a torrent at the end of 2008. More than 20 airlines have added services to Iraq over the past three years. In the past six months alone, flydubai, Etihad Airways, Emirates, EgyptAir, Pegasus Airlines, Turkish Airlines and (the now defunct) Viking Hellas have all added new services or extra capacity into the country. Qatar Airways and Jazeera Airways are set to enter the Iraqi market in the next few months.

Even with record profit Jazeera Airways stays on its new course of limited growth

What a difference two years can make. After a dismal 2009 and 2010, Jazeera Airways Group has spent the past 24 months undergoing one of the most comprehensive restructuring and turn-around programmes in the industry, transforming its results from deep losses to record profits and marking out a clear path for a sustainable future, aided by its higher-margin Sahaab leasing division that generated 52% of profits in 2011.

Following expansion and development since the carrier launched in Oct-2005, Jazeera had been forced to abandon its second base at Dubai and was struggling in its home market at Kuwait. The local market, opened up by the Kuwait government with its open skies policy, was characterised by overcapacity, low load factors and stagnant yields. During 2009, 44% of all seats operating into Kuwait were unfilled. In 2010, 51% were empty.