MIAMI — On Saudi Arabia’s National Day (September 23), the latest contender in the Middle East low-cost carrier (LCC) arena took to the skies.

Flyadeal, a member of the Saudi Airlines group of companies, and sister to Saudia, the national carrier, started life with two Airbus A320ceos and plans to increase this to eight by the end of 2018.

Its arrival on the scene adds another layer of competition to what is becoming an increasingly crowded marketplace. It joins other, well-known carriers (at least in the region) such as Air Arabia, flydubai, flynas, and another newcomer, Oman’s SalamAir.

Somewhat ironically, in the light of so many LCCs today fighting over riyals and dinars, just over a decade ago there was a strong sentiment in the region that LCCs would not prosper.

Low-Cost vs Wealthy?

The belief was that local passengers would equate ‘low cost’ with ‘low quality.’ And, in a region where business class cabins are regularly overbooked, and people carry a lot of baggage, the prospects of an Arabian Ryanair or Spirit succeeding seemed slim.

What rapidly became apparent, however, was that Arabs like a bargain as much as anyone else.

Sharjah-based Air Arabia—the first LCC on the local scene in 2003—today has a fleet of 47 A320s and operates from five hubs across the Arab world, two in the United Arab Emirates, plus Egypt, Jordan, and Morocco.

Similarly, flydubai has 42 Boeing 737-800s in service, with the first two of an order for 76 737 MAX 8s having just been delivered. While not on the scale of European or US LCCs, these are reasonably-sized operations.

It can be argued that several LCCs in the region, such as flydubai, Saudi Arabia’s flynas, and Kuwait’s Jazeera Airways, are hybrid carriers rather than true LCCs, as they have facilities such as business-class cabins (which help to bump up overall yields).

FlyDubai’s Boeing 737 Interior

That is indeed the view of both Saleh bin Nasser Al-Jasser, director-general of Saudi Arabia Airlines group and Con Korfiatis, CEO of new boys on the block Flyadeal. “We believe that the LCC area is ‘white space,’” said Korfiatis.

Al-Jasser believes there is room in the marketplace for another LCC in the increasingly congested Middle East, where yields have been falling even among the juggernauts like Emirates, Etihad and Qatar Airways.

“I don’t see some of those [existing] brands as being low-cost airlines,” said Al-Jasser. “I would call most of them hybrid. What that enables us to do is have a lower cost-base than them.” Flyadeal would have a “world-leading” cost-base, he said.

This has been achieved by not trying to staff the executive offices of Flyadeal solely with Saudia personnel, who may find it difficult to ‘think LCC’ after a career in a full-service carrier.

However, by mixing them with staff, like Korfiatis, who has a background in successful  LCCs such as Australia’s Jetstar and Indonesia’s Citilink. (Interestingly, both of those airlines are also offshoots of full-service parents, Qantas and Garuda respectively.)

Domestic Market in Saudi Arabia is Key

Flyadeal initially intends to fly purely domestically within Saudi Arabia. This is feasible because Saudi Arabia has a sufficiently large population (around 28 million at the last census) and enough long distances between cities to make a domestic network possible.

“I would estimate the domestic market at 20 million passengers a year, and there’s healthy growth,” said Al-Jasser. “The market has been liberalized quickly in the last year. However, its total size and potential for growth is huge, so there’s a space for all participants.”

There is, of course, a risk of an LCC cannibalizing Saudia’s traffic. However, Al-Jasser said the new LCC was aimed at a particular, price-conscious segment of the market. “Of course there will be some cannibalization, but I think it will be marginal,” he said.

That sentiment was echoed by Korfiatis, who is convinced that, as in other regions of the world where LCCs have set up in business, their effect will be to grow the overall market.

In Saudi Arabia’s case, he believes that a true LCC will attract first-time passengers or those who have flown only rarely. Many potential passengers currently drive or take long-distance buses for domestic trips.

“We will be pricing to fill the aircraft,” said Korfiatis. That raises the specter of wafer-thin yields, but he is convinced that the market will expand sufficiently to offset that problem.

This has undoubtedly been the case elsewhere in the region, where flydubai and Air Arabia have expanded services well beyond the Arab world.

Russia, China, India-bound Expansion

One particularly popular destination has been Russia, whose southern borders are only around two hours’ flying time north of the Gulf. Both airlines have a substantial network to regional Russian cities such as Nizhny Novgorod, Voronezh and Mineralnyy Vody.

These services have prospered because the Gulf is a popular holiday destination for Russians, especially those seeking to escape the bitterly cold Russian winters.

Looking even further afield, Air Arabia now travels as far east as Urumqi, in western China and west into eastern Europe. The airline is obviously doing something right, as it has recorded 13 consecutive profitable years.

Gulf LCCs can also tap into the constant waves of labor traffic between the region and the Indian sub-continent, which is within the range of their A320s and Boeing 737s.

Many of the blue-collar and lower administrative posts in the Gulf are held by Indians and Pakistanis and the labor agencies that dispatch them to the Arab world eagerly snap up the LCCs’ fares, which leave them with fatter profit margins, rather than using full-service carriers.

Flyadeal is also looking at the Indian sub-continent as a potential income source when it starts to expand internationally in 2018. And as a Saudi carrier, it also has the considerable advantage of being able to tap into the vast annual flows of Moslem pilgrims to Saudi Arabia for the Haj and Umrah ceremonies. That being so, Pakistan and Bangla Desh would be obvious future destinations.

The next seemingly-obvious development in the region would be for LCCs to materialize in North Africa. As mentioned above, Air Arabia is already present in Morocco and Egypt with local subsidiaries. However, the substantial Egyptian population–95 million and climbing at last count–has enough scope for more entrants, if someone can be brave enough to take the plunge.