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The contender

It's no secret that Emirates has been planning to launch a budget airline, so few were surprised when the news was confirmed last month.
COMMENT, Transportation

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It's no secret that Emirates has been planning to launch a budget airline in the Middle East, so few were surprised when the news was confirmed last month.

The group's management revealed a low-cost carrier would be introduced to provide services across the GCC. It also said the airline will operate independently once Emirates has finished helping establish the airline.

What type of relationship the new venture and Emirates will have following the launch is unknown. Meanwhile, likely destinations, frequencies and prices have yet to be confirmed.

Some questions may be unanswered but there's little doubt passengers unable to afford flights with the region's established carriers will appreciate another low-cost provider. Indeed, with budget carrier passenger figures growing significantly since no-frills airlines entered the Middle East market, there is probably no better time to join.

As Jazeera Airways has proved, low-cost doesn't signal poor returns. The Kuwaiti-based carrier reported US$8.89 million profits for 2007 on $80.6 million revenues - a 61.2% compared with the previous year. Elsewhere, the carrier has expanded its network to some 25 destinations across the Gulf, North Africa and Indian subcontinent, established a second hub in Dubai and announced plans to increase the fleet to 40 Airbus A320s by 2014.
 

Other low-cost airlines such as Sama and Air Arabia appear to have achieved similar success, with both launching new routes, acquiring more planes and securing healthy passenger numbers. But whether such growth can be sustained with another competitor taking off remains to be seen.

Air Arabia's CEO Adel Ali recently claimed a new low-cost airline is good for the industry. He also insisted having another budget carrier highlights rising demand for no-frills services. While the second part of Ali's statement is true, some may question his assertion that more competitors are welcome. An airline that could potentially turn to Emirates for investment could be a formidable opponent for the region's low-cost carriers.

The defining factor, like any budget airline, will be price, with passengers choosing the cheapest option for destinations served by more than one operator. If Emirates offers lower fares than the market's existing players, the likes of Jazeera, Air Arabia and Sama will be in for a tough fight.

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