During the first quarter of 2011, the United Kingdom lost its crown as Dubai’s biggest tourism source market, after a staggering 186,478 travellers from India stayed in hotels across the emirate between January and March this year, more than any other nationality and approximately 10 percent higher than the same period in 2010. The figures, released by Dubai’s Department of Tourism, coincide with previous statistics that revealed 1.8 million expatriates from India are now based in the United Arab Emirates, while annual trade between the two countries has snowballed from $180m in the 1970s to $43.4bn last year.
It’s little wonder, therefore, that passenger demand on routes that link the UAE and India is booming – a situation that has arguably benefited UAE carriers more than their Indian counterparts. In recent years, for example, the growth of Emirates and Etihad has reduced Air India’s market share on these routes, while low-cost carriers Air Arabia and flydubai have also enhanced their networks to include Hyderabad, Mumbai, Lucknow, Delhi and Chennai, amongst others.
This situation has publically been acknowledged as a growing concern by Indian airlines. During an interview with The Hindu newspaper last month, a senior official from Air India Express (AIE) vented his frustration at competition from Gulf carriers, especially when the no-frills subsidiary of national carrier Air India is hoping to breakeven in the next year or two.
“There is no dearth of demand, but the market is so competitive that I cannot afford to re-price tickets. In the past 18 months, I could not touch my fares at all,” the source said. “Beating carriers from the Gulf when it comes to pricing is a difficult problem, as their operational cost is much lower due to cheaper fuel, allowing them to sell tickets at much lower rates.”
AIE, which currently flies to Abu Dhabi, Al Ain, Dubai and Sharjah, has undertaken a number of developments to better compete with Gulf carriers, including the relocation of its headquarters from Mumbai to Kochi for improved operational efficiency, together with a new regional base in Dubai, opened earlier this year to reduce flight disruptions and delays.
This determination to fight back on India-UAE routes has been matched by the airline’s homegrown rival, Jet Airways, which has also been impacted by the rise of Gulf carriers, with vice president of commercial strategy KG Vishwanath recently admitting that lower-than-expected second quarter results for 2011 could be attributed to intense competition and high fuel prices.
Even then, more routes have been earmarked to Gulf markets over the coming months, starting with daily flights from Sharjah to Thiruvananthapuram from the end of October this year. The service, its tenth daily route from the UAE to India and the twenty-second Jet Airways flight from the Gulf to India, will end a previous monopoly on the Sharjah- Thiruvananthapuram route by Air Arabia.
But perhaps the largest blow to UAE carriers will be the forthcoming launch of international flights by India’s fastest growing airline, IndiGo, which will initially connect Dubai to New Delhi and Mumbai, with plans to eventually link 14 destinations across India to the emirate, according to president Aditya Ghosh.
“It’s no coincidence that we selected Dubai as our first international destination,” he said.
IndiGo was named the best low-cost airline in India and Central Asia at the World Airline Awards 2011 and with one of the youngest fleets in the world and return flights to Dubai starting at $222, there could be a viable challenge ahead for UAE rivals Air Arabia and flydubai, and to a lesser degree even full service airlines Emirates and Etihad – the extent to which will probably be determined over the next couple of years.
(Robeel Haq is the editor of Aviation Business. The opinions expressed are his own.)