Low-cost, not full-price, airlines will fuel the Gulf’s aviation boom

Emirates

The Middle East aviation collective has drawn up a series of big hairy audacious goals over the next decade.

These ambitions include enticing 300 million passengers through Saudi Arabia from a current base of 100 million; major new aircraft orders from both Emirates and Qatar Airways; and a rejuvenated Abu Dhabi-owned Etihad returning its A380s to service later in the year. 

There are exciting times ahead with much of the focus on the ‘big three’ or, perhaps by 2025, the ‘big four’ airlines, including Saudi’s Riyadh Air.

• Emirates in expansion drive as new Saudi rival orders 72 jets 
• Saudi Arabia launches second new airline
• Qatar Airways eyes rapid growth as travel demand rebounds

But are full-price airlines really going to drive the sector’s growth? In truth, probably not. Future growth will be fuelled by Middle East budget airlines, for several reasons.

A case of simple maths

Airbus forecasts demand by 2041 to include 31,620 new single-aisle aircraft and 7,870 wide-bodied aircraft – a ratio of over 4:1 in favour of slimmer planes.

Let’s take ultra-low-cost Hungarian airline Wizzair as an example, which is operating its new A320Neos with 239 seats per flight. If each aircraft operates six sectors a day, that quickly adds up to 1,434 seats a day.

Compare that with a brand-new A350 from Qatar Airways with some 327 seats and flying perhaps three flights a day, which produces 981 seats.

Wizzair is producing 46 percent more seats a day on a single-aisle aircraft. Multiply that over a year and the differential stretches into thousands of seats; overlay that with single-aisle aircraft demand being four times more than the wide-bodied and it’s very clear that the low-cost sector is crucial to the future growth of aviation in the Middle East. 

The rapid take-off of low-cost airlines

In 2010, 9% of all capacity from the Middle East was operated by low-cost airlines. By the end of 2023, the low-cost airline pie-slice will have increased to 24% – still below the global average of 30%, but with an average annual growth rate of 12.5% over the last 13 years.

By comparison, legacy airline capacity has only recorded a 2.5% average annual growth rate over the same period.

Indeed, as the table below shows, legacy airline capacity in the Middle East has yet to fully recover and remains 13% below pre-pandemic levels. This is partly because of the complex network of connecting traffic, as well as the wider industry resource challenges. 

Meanwhile, the Middle East budget airline sector has already surpassed pre-pandemic levels with over 20% more capacity than 2019, proving that a combination of low fares, new destinations, and a focus on local market demand can be a successful recipe for growth.

Low-cost airlines in the Middle East	2010	2014	2018	2022
Airlines operating	19	30	32	31
Flights operated	82,313	151,914	249,600	322,836
Airport pairs (AP) operated	1,522	1,816	2,182	1,909
Average weekly frequency per AP	1	1.6	2.2	3.3

An indication of a market’s attractiveness is the interest shown by non-regional carriers. Currently, three of the largest 10 low-cost airlines are based outside of the Middle East.

Collectively the current 10 largest low-cost airlines operating to and from the Middle East have orders placed for some 913 aircraft. Certainly not all of those aircraft will be allocated to the Middle East by airlines such as Indigo or Air India Express, but they will surely either add new destinations or increase frequencies as the market develops.

The Middle East now ticks all of the boxes to engender a successful low-cost aviation industry, including deregulated markets, growing tourism ambitions and mass infrastructure development.

Therefore, it’s little wonder that European, African and even Central Asian airlines are eyeing the Middle East opportunity. I believe the low-cost revolution will be the key driver of the regional aviation boom, if and when it happens.

John Grant is partner at UK consultancy Midas Aviation