Making History: Air Arabia Egypt

The Air Arabia Group was established in 2003 as a Sharjah-based budget operation and has since proven to be highly successful in the Gulf, clearly benefiting from neighbouring Dubai’s boom years. The carrier now operates 20 aircraft, with another 44 on order, signalling future growth plans.

The launch of its sister airline Air Arabia Maroc last year was a strategic move and it quickly established a second base in Casablanca. With a base there, it can serve the largest market in Morocco, which has a population of over three million people. There are over 20 scheduled airlines operating over 690 weekly flights at Casablanca.

The table below illustrates the current Air Arabia Maroc network and the competition that it faces from Casablanca.

Source (Flightbase June 1-7, 2010)

Assessing its network in more detail, Air Arabia Maroc has chosen to serve European markets with a mix of primary and secondary city airports, such as Bergamo and Venice Treviso, and, as the table shows, has not been afraid to operate markets that are served by incumbent carriers in the Casablanca market. Its expansion has been rapid, already serving 11 destinations.

The network is also geared towards the French market, with significant VFR links between the two countries, as well as a population of roughly one million Moroccans working and living in France.

The Casablanca market still has limited low-fare competition, with easyJet operating just 27 weekly flights to Casablanca from four destinations compared with 37 flights and six destinations to Marrakech. Ryanair has no presence in Casablanca, however, it does have 37 weekly flights into Marrakech from 13 European bases. Likewise, Norwegian has entered the Marrakech market but not in Casablanca. The lack of any low-fare competition would surely have been a critical deciding factor leading to the Air Arabia Maroc start-up

Air Arabia Egypt: Who’s the Competition?

The airline’s next goal will be establishing its Air Arabia Egypt. It is targeting the inbound market, with plans to operate scheduled services from Cairo, Alexandria, Hurghada, Luxor and Sharm El Sheikh to destinations in France, Italy, Morocco, Portugal, Spain, Tunisia and the United Kingdom.

Currently the European low-fare carriers have been unable to significantly develop services into Egypt owing to bilateral restrictions. LCCs that operate into Egypt include easyJet (to Sharm El Sheik, Luxor and Hurghada – a network it inherited from GB Airways), as well as Air Berlin, Eurofly (to Luxor, Sharm El Sheik and Hurghada) and Jazeera Airways.

In order to gain access to the Egyptian market, Air Arabia Egypt will initially base two branded aircraft in Egypt and set up an Egyptian AOC (Aircraft Operating Certificate). The carrier has partnered with local Egyptian company Travco Group – the largest in the travel and hospitality group in Egypt with over one million customers. Reports suggested that Travco was keen to start up a LCC in Egypt for a number of years, but until now had failed to find the right partner. Travco will own 50% of the new carrier; the remaining share held by Air Arabia with 40% and a private Egyptian investor with 10%.

Opportunities and Threats?

Egyptair and Egypt Air Express currently operate 62% of all scheduled traffic in Egypt, with a 98% stranglehold on all scheduled domestic flights. This is a monopoly that Air Arabia Egypt could find hard to break up.

However, both the partnership with Travco and the Egyptian AOC will be vital in developing the network in Egypt’s domestic market, which is now largely untapped by the low-fare business model.

Despite the strength of Egyptair and Egypt Air Express’s Embraer 170 operation, there is still a gap in the Egyptian domestic market as fares remain high and the market is currently focused on Cairo rather than serving the local point-to point markets.

Air Arabia Egypt has potential to capture this part of the market, with low-fares linking fast developing resorts such as Sharm El Sheikh to the cultural sites of the Valley of the Kings in Luxor and the Pyramids.