Egypt must strike the Saudi aviation market while it’s hot

Alamy via Reuters

Against the odds, there has been a quiet but impressive recovery taking place in Egypt’s aviation market.

The International Air Transport Association defines Egypt as part of north Africa, but the reality is the country has always been seen as an important gateway to the Middle East.

Egypt’s historic connecting position is being rebuilt as new carriers and expansion plans across established airlines make for a fast-growing market recovery.

---

---

The country’s aviation capacity has trebled over the past 20 years. After the Covid-19 pandemic, more than 18 million seats have been added – an increase of 43 percent.

This traffic comeback places Egypt as the Middle East region’s fourth-largest air market, after the super hubs of Dubai and Doha and the large Saudi Arabian market.

Some 61 scheduled airlines will operate from the country this year, compared with 46 in 2019. Saudi low-cost airline Flyadeal has added nearly 400,000 seats a year to the market since launching services in 2022.

Spanish carrier Iberia returned to Egypt in 2014 and Lot Polish Airlines is back in the game after a gap of almost 10 years. Returning airlines are always an indication of a market in recovery.

Unfortunately Egypt’s increase in capacity from 2019 to 2024 is markedly higher than its rise in passenger bookings

Put it this way: persuading anyone to return to a previously dropped destination requires a major change of heart at head office, and in some cases a swallowing of pride.

So, more airlines mean more competition. While that’s good news for travellers, it means local carriers can struggle to make a profit. For instance, Egyptair has been loss-making since at least 2016, despite post-pandemic market recovery.

Air Cairo, the second-largest locally based airline and part of the Egypt Air Group, has not published any financials, but it can be assumed to have followed its parent’s performance. 

Collectively since 2019, Egypt’s locally based airlines have added 1.5 million seats and increased capacity by 58 percent, while overseas carriers have added around 1.2 million seats. 

Unfortunately Egypt’s 43 percent increase in capacity from 2019 to 2024 is markedly higher than its 28 percent increase in passenger bookings. This disparity results in lower yields and larger losses for local airlines, which are the most vulnerable to new entrants.

With the dominance of big hitters such as Emirates, which serves both local demand and sucks large volumes of connecting traffic out of Egypt via its Dubai hub, there is little room for the local airlines to compete in either locally or for connecting traffic.

All of this poses a question for Egyptian aviation: where next, and can it ever be profitable?

The Saudi market opportunity

Saudi Arabia’s growth trajectory towards 2030 creates new opportunities for overseas airlines and markets, as much as it does for local players. Egypt is particularly well placed to capitalise on the opportunity and has already seen an expansion of services between the two countries in recent years. 

To take advantage of this opportunity, locally based Egyptian carriers need to move quickly. Major Saudi-based airlines in both the legacy and low-cost sectors have massive numbers of aircraft scheduled for delivery in the next few years, while Egyptair has only eight B737s scheduled for next year and a further 10 in 2026.

• Middle East airlines in race to recruit as pilot shortage bites
• ‘It’s survival of the fittest’, says Oman Air CEO
• John Grant: Egyptair must make some tough choices

Ideally, Egyptair should allocate some of this new capacity to Saudi regional routes, where rapid growth driven by positive factors such as GDP per capita and disposable income are creating new markets. 

In an area where capacity has significantly increased, Egypt-based airlines are likely to find Saudi Arabia to be one of the few markets where they can both compete effectively and achieve acceptable profit levels in the coming years.

By contrast, failure to adapt to the increasing competition, particularly from carriers like Ryanair, Wizzair and EasyJet which are seeking new markets, is likely to lead to dire financial consequences for airlines which have not been profitable over the recent two-year aviation recovery period. Their balance sheets are likely to reflect this struggle.

Time may well prove that running an airline in Egypt is just too difficult and that profitability is always a step too far away.

Faced with the dual opportunity and threat posed by Saudi Arabia, the next few years are a critical make-or-break period for Egyptian aviation.

John Grant is partner at UK consultancy Midas Aviation