Arkia Express Looks To Europe For Low-Cost Flights

Arkia Express intends to operate as a low-cost entity, with no seat assignment, buy on board service and charges for baggage.

Arkia Airlines has traditionally operated a mainly domestic schedule, with its international strategy largely a charter service supported by tour operators. Arkia also operates scheduled flights from Tel Aviv to Amman, Barcelona, Charles de Gaulle, Dublin, Eilat, Kiev, Larnaca, Munich and Tbilisi.

Its current charter schedule links Israel to over twenty destinations, however the carrier is keen to develop scheduled low-cost traffic from its main base in Tel Aviv. It operates services with ATR-72 aircraft, E-195 regional jets, and B757-300 aircraft which will be utilised for the Arkia Express operation.

The carrier has established Arkia Express as a reaction to the growing low-cost competition which is entering the Tel Aviv market.

THE ISRAEL MARKET

The Israeli market is currently dominated by El Al, which according to September Flightbase data operates 41% of all scheduled flights, with Arkia scheduled flights accounting for just 6% of all flights. The Israeli market is dominated by the capital Tel Aviv, which accounts for 92% of all scheduled weekly seats from Israel. The market still largely dominated by flag carriers as IATA BSP data demonstrates below.

Source: AIRPORT IS (June 2009-2010)

LOW COST IN ISRAEL

As the table above demonstrates, legacy carriers currently dominate the Israel market. The arrival of Arkia Express will seek to counter the growing threat of the low-cost market. Germanwings currently serves Tel Aviv on a twice-weekly basis from Cologne, with fellow Germany based operator Air Berlin offering eight-weekly flights to Tel Aviv from four source markets, Cologne, Dusseldorf, Munich and Berlin Tegel, with UK low-cost easyJet serving Tel-Aviv from London Luton five-times weekly.

Danish low-cost operator Cimber Sterling will begin services to Tel Aviv from Copenhagen in November, to be operated on a thrice-weekly basis, Spanish operator Vueling serves Barcelona on a thrice-weekly basis, and Jet2.com serves Tel Aviv from Manchester.

Tel Aviv is becoming more attractive to low-cost traffic and provides two-way traffic with a strong inbound product, as well as outbound demand. Seasonality is flat owing to VFR demand and the winter temperature being good. There is currently limited competition and a good spread of leisure, business and VFR.

As the European low-cost operators are looking more to new markets, such as in North Africa and the Middle East, Arkia will view it as only a matter of time before more low-cost capacity is placed into the Tel Aviv market. And rather than having market share taken by these carriers, Arkia's decision to launch its own low-cost entity will mean that it is better placed to compete for the passengers now and in the future, and will hopefully delay the arrival of further low-cost traffic.

The Paris to Tel Aviv sector is currently operated by Air France 11 times weekly, El Al 17 times weekly with Arkia itself operating four times weekly. According to IATA BSP data, over 493,000 O+D passengers flew the sector between June 2009 and June 2010, with 84% of the passengers travelling on non-stop services.The Paris sector will help lower costs but this will have limited effect and will be more about stimulating the market.

Amsterdam is currently operated by SkyTeam member KLM six-times weekly and El Al ten-times weekly. With nearly 200,000 passengers having flown the route between June 2009 and 2010, it is large market with currently no low-cost presence. This decision to open a new route under the Arkia Express brand shows that Arkia Express does not have the sole intention of lowering costs, but also expansion into new markets.

WHERE NEXT FOR ARKIA EXPRESS

Arkia Express will have greater flexibility in the destinations that it is able to serve, being able to target thinner routes and look to stimulate demand. However it is expected that Arkia Express will concentrate upon serving the larger conurbations such as Frankfurt, London and Rome in its next wave of route development expansion.