Budget carriers’ price war causes jump in flight demand

Consumers are now more cautious in their expenditure, says Nadejda Popova of research company Euromonitor International, while airlines have been heavily promoting and discounting their product offerings.

Flydubai added 19 destinations last year, including flights to east Europe and Central Asia. Karim Sahib / AFP

Budget airlines have received a boost in demand as cost-conscious holidaymakers respond to heavy discounting by no-frills carriers.

Outbound travel has been affected by slowing economic growth, according to Nadejda Popova, the ­travel project manager at research company Euromonitor International.

“This resulted in many consumers becoming more cautious in their expenditure, while many expatriates were also hit by poor economic conditions in their own countries,” she said. Meanwhile, “the carriers themselves have been heavily promoting and discounting their product offering of late”.

While such discounting is good for consumers, it is also eating into airline profit.

Kuwait’s budget airline Jazeera Airways, which flies to Dubai International Airport, on Monday reported a 3.2 per cent increase in passenger figures during the first half of the year, despite a 3 per cent decline in net profit.

Low-cost carriers in the UAE, such as flydubai and Air Arabia, are expected to grow passenger numbers by almost a fifth during this financial year, according to Euromonitor.

Sharjah Airport handled 5.3 million passengers during the first half of the year, up 11.5 per cent year-on-year, mainly driven by the expansion of Air Arabia routes. During the first quarter, the airline flew 2.1 million passengers, up 17 per cent year-on-year.

Flydubai, which was founded in 2008, added 19 destinations last year, including flights to east Europe and Central Asia. It has announced double daily flights to Bangkok in November. Popular destinations include the Maldives, Salalah, Sri Lanka and Zanzibar besides Brati­slava, Bucharest, Prague, Sarajevo, Sofia and Zagreb in eastern Europe, according to flydubai.

These are the destinations that also attracted the budget holiday packages.

Owing to the vast number of travel agencies in the UAE, especially in Dubai, competition is also leading them to tap into the budget travel segment.

There are about 1,144 travel agencies in Dubai as of the end of June, according to the Dubai Department of Economic Development.

“With [the] increase in the cost of living, budgeting has become inevitable,” said Digvijay Pratap, the co-founder and managing director of HolidayME in Dubai. At HolidayME, an online travel portal that started in December 2014, a four-day package deal starts at Dh1,500 to Armenia, including airfare. This year, it has sold about 100 deals up to the end of last month.

“We’ve more than doubled this year in comparison to the same period last year, which was when we started operations in the Middle East,” Mr Pratap said. In the UAE, the period from May until August remains the peak travel season because of school holidays.

At Musafir.com, budget holiday packages, including flights, hotels, transfers and tours, range between Dh1,000 and Dh4,000.

Last month, it sold about 1,850 package deals on budget holidays, compared to 650 packages last July, said Raheesh Babu, the chief operating officer of Musafir.com.

“I reckon the main reason is the servicing of more low-cost airlines in the region, and more availability of newer destinations within a four-hour travel time frame,” he said. “Another target market, the unmarried expats are lapping up these budget holidays over the weekend to escape the hustle and bustle of everyday life in the city.”

Staycations within the UAE, which have gained in popu­larity according to hotel operators, could face competition from the budget sector.

On budget holidays “you would save a lot more, visit a new place, take advantage of the currency exchange of an [Arabian Gulf] resident and it would be a lot cheaper than paying the same amount or more on a staycation,” said Mr Pratap of HolidayME.

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