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Low cost carriers need to review model says Mid East panel

Posted 3 May 2009 · Add Comment

Passengers have been 'brainwashed' into thinking that air travel is cheap and airlines both network and low cost carriers need to review the way they operate and think innovatively if they are to survive - that was the key message to come from a panel session at the Aviation Outlook Conference in Abu Dhabi .

Professor Nawal Teneja, chairman of the Department of Aviation at Ohio State University and a well known aviation business author said that passengers have developed a level of expectation about low fares, “Then they will get in a cab at JFK or Heathrow and spend more than they did on their air ticket without question,” he said.
The solution of growing ancillary revenue “ like charging $15 for an aisle seat, another $15 for a meal or $100 to change a flight time is good in the short term, but in the long term it will backfire. The winners are those that have a good value proposition, not price. It is the schedule, the reliability – by which I mean what you do when things go wrong, not just whether or not you arrive on time – and consistency.

“Connectivity and branding will define success,” he said.

Abdul Wahab Teffaha, the secretary general of the Arab Air Carriers Organisation was moderating the panel and said that it seemed network carriers need to be privatized, prepare for consolidation and learn from global best practices.

IATA regional vice president for MENA, Majdi Sabri said that airlines needed to learn about efficiencies that will not affect levels of service.  “ But they act too slow. “Why can’t airline’s adapt quickly, why is consolidation not happening? This is the most regulated industry in the world. Most consolidation happens where there is free market movement.”

Professor Taneja warned that it the low cost carriers that are the most nimble and innovative and blurring the old distinctions with legacy or network carriers.
“Ryan Air is looking at the US and Canada. People scoff but Ryan Air is no longer an Irish airline it has more hubs in Europe than you could imagine. It is a European airline and it could do it. They break the conventional rules. AirAsiaX is flying at different times from an airport rather than the same times every day in order  to utilise crew times. “  Teffaha pointed out that Air Arabia is working with Yeti Air to operate in Nepal and followed this up with Morocco.  “If they were offered Egypt or Lebanon they would grab it. Would a network carrier do it?”

Peter Hill, CEO of Oman Air who is bringing the national airline from a regional carrier to a full service carrier said there were great differences in the Middle east region.
“Look at a true low cost carrier like Ryan Air. Michael O’Leary gives nothing . You get point to point and nothing else but you get the lowest fares in the business. He is ruthless at what he does and he gives people what he thinks they want. 

I would question if it would work in this region? Low cost carriers are mimicking the full service carriers while these full service carriers are thinking value and adapting. The LCCs are leveraging upward and losing the true benefit of reducing costs and keeping everything to the bare bone. We saw the explosion of LCCs in Indian market a few years ago. Explosive growth could not be sustained. Many of these startups are funded by people without experience in the aviation industry and I bet most are regretting that action. Some are entering into international  markets and are literally losing their shirts. How many of these new airlines will survive? I think there will be a lot fewer than we thought.”


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