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February 17, 2022

Middle East set for low-cost carrier boom

With travel budgets tightening due to the pandemic, and growing demand for affordable luxury, the Middle East could witness a significant shift towards the LCC market.

By Globaldata Travel and Tourism

Over the last few years, European low-cost carriers WizzAir and Ryanair have entered the Middle Eastern market. In addition, Middle Eastern low-cost carriers (LCCs) such as flydubai, Air Arabia, and Jazeera Airways have cashed in on growing low-cost demand. Despite this, the market is yet to reach its full potential.

Once a region that seemed to be exclusively aimed at the luxury tourist, destinations in the Middle East are now diversifying into mainstream leisure markets while remaining conscious of the need to not overdilute their luxury image. With travel budgets tightening due to the pandemic, and growing demand for affordable luxury, the Middle East could witness a significant shift towards the LCC market in order to fulfill aspirations to holiday in a luxurious destination.

Inbound and outbound tourists demand cheap fares in the Middle East

While the luxurious pull of destinations such as UAE, Qatar, and Bahrain can whet the appetites of high spending travellers, it is important to note that much of the global leisure market still values low-cost fares above all else. According to a GlobalData Q3 2021 Global Consumer Survey, 58% of respondents said the cost was the most influential reason for booking a holiday. Furthermore, 57% of respondents from the UAE also agreed with this sentiment, highlighting the demand for affordable holidays across the board. The research clearly shows that there is demand for low-cost airlines from both inbound and outbound tourists, maximising the opportunity for LCC growth in the region.

LCC’s must take advantage of the affordable luxury trend

The mixture of low-cost travel and the prestige of Middle Eastern hospitality may seem like an unusual mix, but affordable luxury is an emerging market trend. LCC tickets can make this a reality for many travelers, with the typical fare costing up to 60% less than the average full-service carrier (FSC) fare, according to GlobalData’s Market Competitor Insights.

The pressures of inflation and economic hardship due to the pandemic, and the need for hedonistic, unique experiences, are driving traveller demand in this sector. As such, low-cost airlines have a prime opportunity to penetrate this developing tourism market. Other tourism businesses have already had significant success using this concept, turning over millions each year. Examples include Secret Escapes, and Groupon, which offer luxury travel products and experiences at low prices, helping sustain the affordable luxury trend.

Low-cost airlines will build on their recent success

According to GlobalData’s Passenger Airlines Database, in 2009, low-cost carriers in the UAE and Saudi Arabia consisted of approximately 8.8% of all seats sold within their respective markets. However, by 2021, this had almost doubled to 16.3%. However, FSCs such as Emirates have continued to perform well, with full-service carriers maintaining approximately 71% market share consistently over the last decade. However, charter services have dropped significantly, falling from 19% to just 13% in 2021. These statistics show that, while the demand for low-cost airlines is growing in the Middle East, there is still a substantial market for legacy carriers. As a result, carriers such as Qatar, Emirates, and Etihad will continue to hold a considerable part of the market.

Nevertheless, the rise in popularity, alongside some of the Middle East’s destination’s ambitious growth plans to become one of the world’s most popular tourism regions, will see the low-cost airline industry boom in the region over the coming years.

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