Flydubai launch provides wider benefits
Posted on 08 April 2009 with no comments from readers
Does the launch of a new low-cost carrier to compete head-on with an existing government airline make much commercial sense in the worst global economic recession for 70 years?
At first sight the logic behind the upcoming launch of flydubai in June does not look obvious. It will take some business from Emirates Airline, which is already suffering from the global passenger downturn, although it should create additional business by lowering the cost of flights.
Air Arabia
Indeed, the biggest loser should be the existing UAE low-cost airline, Air Arabia, whose success from its base in Sharjah is the envy of the regional industry. Passengers may well desert Air Arabia, particularly if they live in Dubai and prefer to travel from a closer airport.
However, much will depend on prices, routes and timings. Sharjah airport is not so far away in a taxi. It will be far more important to see the offering that flydubai creates.
The initial service will be to Beirut and Amman from June with two Boeing 737-800 aircraft, immediately hitting two of Air Arabia’s most profitable routes, while four more planes are due for delivery by the end of the year. Kuwait’s Jazeera Airways is the only other competitor, and uses Kuwait and Dubai as a hub.
Passengers will undoubtedly welcome lower prices on key regional routes as the Middle East has been criticized for exorbitant pricing on short-haul routes for years.
Competition
However, it remains to be seen whether Dubai Government is correct to launch a new competitor to Emirates at this point. This airline is already squaring up to strong competition from Abu Dhabi’s Etihad and Qatar Airways, and flydubai is bound to capture some economy traffic.
On the other hand, the government can take the bigger view and hope to win a larger total inflow of tourists by cutting the cost of travel at the lower end. There is more to the tourism business than passengers on seats, most of the money is made from what they spend in Dubai.
In that regard adding a low-cost carrier is a bonus to the tourism infrastructure of the city as a whole, and justified in terms of the total economic benefit. The related publicity is just another bonus.
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