Why Low-Cost Carriers?
Trends in the airline market over the years have produced various
airline models as airlines themselves adjust to fit, perhaps,
profitably in the continuum of industry highs and lows. Low-cost,
low-fare, discount, budget or no-frills airlines loosely refer to
the same group of airlines that provide their flight services at
relatively much lower ticket fares than other airlines that offer
full-service or traditional passenger operations. The low-cost
airline model is the product of airlines' quest to bolster load
factor by empowering more people to fly, cut costs by eliminating
traditional 'free' services on board, among others, and enhance
profitability by gaining additional revenues that accrue from
increased passenger load factor. Low-cost carriers are customarily
associated with short-haul flights (as air travellers may not
prefer longer flights without meals). But increasingly, in the
efforts to reach into wider markets and shore up revenue, there are
stronger indications, especially in other regions such as Europe
and Asia, that low-cost airlines may become regular features on
long-haul routes. Many examples of low-cost carriers are in the US
and Europe where vibrant air transport markets have supported the
segmentation of these markets. Low-fare carriers are also a
concomitant of emerging and robust markets as seen in India, China
and other countries in the Far East and the Middle East. Africa's
emerging market is still grappling with developmental challenges,
which may explain the slow emergence of low-cost airlines in the
region. However, prospects of low-cost carriers in Africa are, and
would be, largely driven by the overwhelming need for affordable
airfares by the predominantly low-income populace.
Low-Cost Carriers In Africa
Currently in Africa, about ten low-cost airlines can be
distinguished. West and Central Africa have the least presence of
low-fare airlines. While Central Africa has no notable
low-cost carrier, West Africa has Nigeria's Aero which seemingly
plays in the low-cost category, though the airline says it is not a
low-cost carrier, per se. The airline, about a year ago commenced
strong continuing p
romotional fares which run
alongside its normal fares; and this makes many believe the airline
is actually low-fare. Asked if the airline is becoming another
low-fare brand in Africa, the former Managing Director of the
airline, Mr. Shaf Syed, says the airline simply wants to enable
more people to fly. "It's not about low-fare; it's about empowering
people to travel; that's what the rationale is. We believe Nigeria
has a poor road infrastructure and rail network.
So, aviation is really the only viable means of travel for people
across Nigeria. There is a massive market in Nigeria that you can
tap into before going to the sub-region." Aero operates to 13
destinations in Nigeria, and also to Accra, Ghana, from its Lagos
hub. Aero operates the B737-400, B737-500, Dash 8-300
aircraft.
In North Africa, perhaps, the influence of low-cost carriers in
Europe and the pull of European tourists could have caused the
springing up of more low-fare carriers than in other parts of
Africa. Egypt has the Air Arabia Egypt, a variant of Air Arabia
which claims to be the largest low-cost carrier in the Middle East
and North Africa region. In Morocco, Air Arabia launched operations
from its second hub in Casablanca in April 29th, 2009, with the Air
Arabia Maroc. The airline says it operates direct flights from
Casablanca to the cities in Europe. Both the Air Arabia brands in
Egypt and Morocco operate the A320s.
In Morocco also, Atlas Blue is another low-cost carrier based in
Marrakech and established in 2004 under the Royal Air Maroc to tap
into, as well as drive the tourism market in the region in line
with Moroccan government's aim of drawing 10 million tourists by
2010, and more, going forward. It has nine aircraft and operates to
13 destinations.
Another low-cost carrier yet in Morocco is Jet4you. It operates
the B737-800 aircraft. Jet4you flies from Agadir, Marrakech, Oujda,
Fes, Rabat and Casablanca in Morocco to destinations in Europe.
Tunisia's low-cost airline is Karthago Airlines which operates
about 4 Boeing 737-300 aircraft. Established in 2001, it operates
to destinations in Europe and North Africa. Karthago has hubs in
Djerba-Zarzis Airport and Tunis-Carthage International Airport hub.
In South Africa, three low-cost carriers operate, including
kulula.com, 1Time and Mango. kulula.com, whose parent company is
Comair Limited, banks on on-time performance to boost its passenger
base. Its popularity is increasing among travellers in the region.
1time was established in 2003 with its hub in OR Tambo
International Airport. It operates a ten aircraft fleet to 8
destinations within and outside South Africa. Established in 2006,
Mango is a subsidiary of South African Airways and operates a fleet
of about 4 B737-800s to eight destinations in South Africa. The
airline is establishing a strong niche in South Africa's
low-cost market. In Kenya, Fly540 operates as the country's first
low-cost carrier, using ATR and CRJ-100/200 aircraft. It offers
business jet services with LearJet 40XR, Gulfstream 150, /200,
Challenger 850 ER and Falcon 2000. It operates to nine destinations
in Kenya, and serves other points in Uganda, Tanzania and
Burundi.
Strategies Helping African Low-Cost Carriers
Survive
Primarily, low-cost carriers take advantage of reduced fares to
drive their passenger numbers and, in turn, increase revenue. But
like full-service airlines, low-cost carriers are also under the
inexorable regulations of their various civil aviation authorities
who stipulate that the source of funding (revenue) must be adequate
to support safe operation of such airlines.
Sales On-Board
Low-cost carriers in Africa sell meals and other items onboard as
a way of making ancillary revenue. Air Arabia confirms it offers
full economy class, while "food and beverage can be bought during
the flight." It also plans to enable passengers pay for meals
online. Ancilliary sources of revenue make up 10% of Aero's
revenue. Aero says: "This great feat by the leading African
e-carrier, places Aero right behind Ryan Air, Europe's leading
low-cost carrier that has about 13% of its total revenue from
related sources."
Innovativeness
Low-cost airlines in Africa adopt innovative strategies
to increase their market-share. Mr. Adel Ali, Group Chief Executive
Officer of Air Arabia, says its new innovative service would
contribute to the growth of tourism sector across Morocco and offer
customers "value for money product."
Mango's innovative strategy led to its being recognized as "the
coolest low-cost airline in South African skies at the Generation
Next awards in Johannesburg 2010," a recognition it equally won in
2009. Mango CEO, Mr. Nico Bezuidenhout, says the youth market
remains one of the most important brand seeding platforms for any
business.
Flight Punctuality
On-time performance is another strategy low-cost airlines utilize
to drive passenger base. For instance, Jet4you says it registered
an average seat load factor of 85% over all its operating routes,
and flight punctuality (On time performance) of 68 % for September
2010. And kulula.com states: "…to show just how seriously we take
our on-time performance track record, we set ourselves a target of
getting 90% of our flights to take off timeously." And Aero's Mr.
Syed says: "As we go forward, our model is to empower more people
to travel, get them off the roads and into our aircraft to fly
efficiently, safely and in good time as well."
Newer Aircraft
To excite passengers, some African low-cost carriers use newer
airplanes with comfortable onboard entertainment systems such as
the B737-800s and A320s. Air Arabia says it "only flies new
aircraft of the type Airbus A320," on its entire network. With such
aircraft too, low-cost carriers in Africa make strong statements on
their contributions to carbon reduction, presenting themselves as
environmentally responsible corporate citizens. Low-cost airlines
operating newer aircraft additionally benefit from
fuel-efficiency.
Would Low-Cost Carriers Replace Full-Service Airlines In
Africa?
The number of low-cost operators is bound to increase in Africa in
the coming years. Some of the emergent low-fare carriers may take
pseudo forms like Aero - offering price-cut promotions. But there
is strong pressure from the flying public to embrace reduced or low
air fares, and airlines that hearken to this passenger need can
vigorously build-up passenger numbers and establish a firm foothold
in the market. It is instructive that intra-African routes can
support low-fare operations given that many city-pairs are yet to
be connected and there is a gradual but steady march towards
liberalization of African skies. All these with an improved African
economy can support more and successful low-fare carriers in the
continent. Low-cost and full-service carriers would operate
side-by-side in the African skies, each serving the needs of
different segmentation of passengers in Africa.
Long-Term Prospects
Besides tourist arrivals and buoyant economy, a major tail-wind
for African low-cost carriers is the large population of
prospective flyers in Africa, majority of whom have never flown
before. It is up to African low-cost airlines, therefore, to adopt
effective business models within the low-cost framework that would
enable them execute effective marketing, route planning, on-time
performance, financial management, e-commerce, among others, to
excel.
End