Wizz Air Abu Dhabi deal could mark start of European influx

Wizz Air Abu Dhabi deal could mark start of European influx
Published: 17 December 2019 - 5 a.m.
By: Gavin Gibbon

Wizz Air’s flight into Abu Dhabi airspace could signal the start of a European invasion into the Middle East market, according to a leading aviation analyst.

Eastern Europe’s biggest discount airline announced last week that it had reached a deal with Abu Dhabi Development Holding Co. to operate a new carrier in the emirate from Abu Dhabi International Airport.

The airline, which will be 51 percent Abu Dhabi owned, will start flying in the second half of next year with a fleet of three new Airbus SE A321neos, increasing to 50 planes over 10 years.

John Grant, director of JG Aviation Consultants in the United Kingdom, told sister title Arabian Business: “What we are seeing here is the maturity of the European LCC market beginning to encroach into the Middle East.

“Carriers such as Wizz Air and Ryanair are exhausting the opportunities from Europe and have been moving further and further south east in their network development.

“The natural extension of that is to move into the Middle East market although the degree of liberalisation means that the airlines need to find local partners and effectively register an airline in that territory.

“LCCs need to grow to survive and with more aircraft on the way etc. it had to happen at some point.”

'Significant player'

While the start-up will initially serve cities in Europe and Russia, it later plans to target the Middle East, Africa and the Indian subcontinent. The move will bolster connectivity in an Abu Dhabi market where air links shrank by almost a fifth in 2018 as flag-carrier Etihad cut routes after billions of dollars in losses.

Wizz Air chief executive officer, Jozsef Varadi, said the new airline - the Budapest-based group’s first outside Europe - will be named Wizz Air Abu Dhabi and aims to be “a significant player in the region”.

Andrew Charlton, managing director of Aviation Advocacy, an air transport consultancy, told Arabian Business: “I see this as a play to make the expanded and very flash new AUH airport busier. Perhaps they read it as a moment to capitalise on just how very full DXB is and thus a big chance to make AUH a really thriving hub.”

In establishing an arm in the UAE capital, Wizz Air will be competing on the same turf as Air Arabia Abu Dhabi, which Sharjah-based Air Arabia, the Middle East’s biggest discounter, said in October it would launch in conjunction with Etihad.

But, according to John Strickland, director of JLS Consulting, that will not necessarily result in a conflict of interests with the two carriers.

He told Arabian Business: “While there could be duplication or conflict with the recently announced Air Arabia, in my view both airlines have sufficiently large networks focused on very different geographies to allow development on a complimentary basis.”

Price war

And, at the same time, Tobias Rueckerl, CEO of London-based Advanced Aviation Consulting (ADAVCO), does not expect to see huge price differences for passengers.

He said: “Will we see a price war? I doubt that given that the government is involved direct and indirectly in both ventures. They are not interested in creating a loose-loose situation; however, they could be forced into price wars with possible new LCC entries in this market.

The MENA low-cost air travel model was first introduced in the UAE in 2003 and has been rapidly growing since. Today, the Middle East market enjoys the third highest gains in intra-regional low-cost carrier penetration rate. Low-cost carriers accounted for 17 percent share of seat capacity to and from the Middle East in 2018, compared to only eight percent in 2009.

Wizz Air will be the seventh airline to operate from the UAE after Emirates airline, Etihad Airways, Air Arabia, Flydubai, Air Arabia Abu Dhabi and the new, as yet unnamed, airline planned to operate from Ras Al Khaimah.

Start-up costs should be similar to those for Wizz’s recently opened units in the UK and Vienna, while the airline reckons its cost base will about 30 percent lower than the nearest competitor, said Savjani, adding that a new aircraft order might be needed to support growth.

ADDH was established in 2018 as a public joint stock company and holds a portfolio of state-owned enterprises spanning utilities to health care and including Abu Dhabi Airports.

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