Air Arabia is the first low cost company performing in the MENA’S region. It has considerably developed thanks to strong cost management, adapted business model, and intelligent commercial offers.
In an environment which is highly competitive because the advantages come from low prices, where clients and suppliers have an important power of negotiation, where new entrants can be both new LCC and existing normal companies which could create sub brands or suddenly propose promotions on specific routes or periods, and where substitutes are always threatening, especially within a limited geographical area like the GCC, Air Arabia benefits from PEST variables that are quite encouraging.
Moreover, if Air Arabia benefits from a good image, a pioneer positioning, creativity, the fact that people fly more and more, and that hubs provide synergies, it also suffers from limited evolution solutions, obsession for cost decreases, PEST variations, possible market saturation, and price wars risks. After studying various elements and proposing an external and internal diagnosis, we reach the conclusion that the natural volume market of low cost companies may mutate and eventually slowly move to necessary small differentiations and specialisations on structures that could be “low-cost-high-positioned” oriented.
So what we recommend to Air Arabia is to remain commercially aggressive and customer-driven but instead of seeking only new cost decreases, especially in areas that could be dangerous for the quality of the maintenance and for the safety of the passengers (if a low cost company plane crashes, everybody will say that it is because the obsession for cost decrease put passengers in danger), to propose non-costly differentiation offers such as more ground services like better ticketing solutions, and to invest in advertising to inform about those advantages.
We think that being customer-driven means developing customer loyalty and such services are the only way to develop loyalty in environments where price is always the first advantage people naturally look for. Finally, we recommend Air Arabia to keep developing new routes and schedules with caution because quick developments are always risky in highly competitive environments.
We think that it is then better to secure market shares on the existing and to focus investigation, investment, and communication on a relative differentiation that will slowly position Air Arabia on a higher quality / low cost company, increasing entry barriers, and moving it from a volume market to a light specialised market. We believe that this is the occasion for Air Arabia to re-invent the concept of LCC.