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AIR TRANSPORT REGIONAL

W
hen Nile Air was publicly unveiled at the 2007 Dubai Airshow
at the height of the Gulf aviation-buying spree the Egyptian
start-up signed a memorandum of understanding for nine Airbus
A321s.
Seven years on, the Saudi-owned company operates a more modest fleet
of two smaller A320s. Its launch coincided with the onset of a global
financial crisis, followed by two successive political revolutions that
decimated tourism to its home market.
But, having weathered these storms, Nile Air is now charting a clear path
to expansion. The airline continues to be shielded from the downturn by its
diverse traffic mix, and it is gradually benefiting from Egypts improved ties
across the region.
The markets between Egypt and the Middle East have been extremely
resilient, said Ahmed Aly, the newly appointed chief executive of Nile Air.
The number of seats being offered between Egypt and Saudi Arabia has
grown by 96% when comparing January 2014 to January 2011. They have
actually registered exceptional growth despite all the issues occurring in
Egypt. And that is very different to the more sensitive European tourism
market.
Nile Air today operates out of three Egyptian airports (Cairo, Alexandria
and Luxor), serving five points in Saudi Arabia (Jeddah, Tabuk, Qassim,
Taif and Yanbu) plus Kuwait.
Much of its inbound traffic comprises Gulf-origin tourism and business
flows which, according to Aly, have held up much better than from Europe.
The fact that Nile Airs owner, Nasser Al-Tayyar, is chairman of Saudi travel
firm Al-Tayyar Travel Group undoubtedly spurs demand, giving the airline
very strong clout among the kingdoms high-spending holidaymakers.
But tourism is just one facet of its customer base, which is evenly split
between Egyptian nationals and foreigners. Theres also a large diaspora
of Egyptians living in Saudi Arabia and Kuwait, so weve got strong visiting
friends and relatives (VFR) traffic, Aly noted. And
Egyptians are the second largest nationality that travels to
Saudi Arabia for religious purposes, which will continue
to grow.
With Egypts tourism sector still under pressure,
one Saudi-backed airline is carving a niche in
the regional market. Martin Rivers talks to
Ahmed Aly, CEO of Nile Air.
The source
of Niles
success
Ahmed Aly: Were sure that
the key markets, particularly
western Europe, will rebound,
and that opens up new
opportunities for us as we
grow our fleet.
Continued
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REGIONAL AIR TRANSPORT
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With Nile Air also providing the only business
class option on some routes securing custom
from government, military and corporate
travellers the airline has an enviable spread of
passenger types which has proven extremely
resilient to the current changing landscape in
Egypt.
Last year saw Nile Air grow its passenger
numbers by 21% against load factors of 72%,
and the airline remains focused on new
expansion opportunities.
Its fleet size will double to four A320s during
2014, Aly confirmed, with operating leases of at
least five years being targeted for the new units.
The longstanding A321 order is meanwhile
"subject to ongoing contractual negotiations"
with Airbus.
Asked about the appeal of the smaller A320s,
Aly described the type as "the most versatile and
flexible aircraft" for Egypt today, noting that
90% of traffic to the country originates within a
five-hour flying range. The airline has reduced
the size of its A320 Business Class cabins from
16 to 8 seats, lifting overall capacity to 164.
Longer term, Nile Air is still finalising its
future fleet plan and has not ruled out adding
wide-body aircraft at some point. Wide-bodies
will obviously give you lower costs per available
seat kilometre (CASKs) and a competitive edge,
Aly said. Its certainly something on the radar.
Expanded fleet
Putting the expanded fleet to work will
undoubtedly require network growth, and the
chief executive sees no shortage of target
destinations to evaluate.
When you look at the largest markets out of
Egypt, the big three in the Middle East are Saudi
Arabia, Kuwait and the UAE, he said, hinting at
new links with Dubai or Abu Dhabi. About
300,000 Egyptians live in the UAE, making it a
potentially lucrative VFR market for Nile Air.
When we look at north Africa, we also see Libya
and Sudan as being strong areas for growth in the
future.
But with the Egyptian diaspora estimated at up
to eight million, the airline is also now looking
beyond the Arab world.
The UK is a strong market for Egypt given the
large Egyptian population there, Aly noted,
pointing to his own roots in Britain. Likewise
with Italy. And Turkey has a liberal visa process
for Egyptians, so its seen as a good tourist
destination for Egyptians. These markets are
relatively under-served given their
attractiveness.
Even with the advantage of VFR traffic,
however, expanding into Europe will be risky until
tourism flows stabilise. Visitor numbers to Egypt
dropped 28% in the first two months of 2014,
setting the tone for another challenging year.
Tourism plummeted from 14.7 million visitors
in 2010 to just 10 million the following year,
when President Hosni Mubarak was overthrown
during the Arab Spring uprisings. A tentative
recovery in 2012 was promptly derailed by last
years Second Revolution against the Muslim
Brotherhood pushing the 2013 figure down to
9.5 million but Aly has no doubts about the
long-term prospects for Egyptian aviation.
Were sure that the key markets, particularly
western Europe, will rebound, and that opens up
new opportunities for us as we grow our fleet,
he insisted.
The Egyptian market is highly dynamic.
Weve got several very strong advantages, which
I would define as high potential. Egypt is a
tourism destination with global appeal the
country offers history, culture, and beaches.
Theres also a significant population centre with
more than 85 million people, and a growing
middle class. And we have a strategic location;
were at the crossroads of Africa, Asia and
Europe.
Although Nile Air has begun exploring far-
flung destinations, there is no denying that
improved relations closer to home have lifted its
performance.
Riyadh had been among the strongest
regional critics of the ousted Muslim
Brotherhood party, straining bilateral relations
during the groups short time in power. But with
the two countries now rekindling political and
economic links, Aly points to much stronger
volumes coming out of Saudi Arabia in the
summer 2014 season.
Nile Air is perfectly placed to benefit from this
trend because of its unique position in the local
market. As well as enjoying close ties to a major
Saudi travel firm, the airline has carved a niche as
a private scheduled carrier in a space traditionally
occupied by low-cost charter operators or hub
carriers.
Last year more airlines started to go into
scheduled areas, Aly admitted, likely referring to
the evolving strategy of EgyptAirs regional
affiliate Air Cairo. But were not concerned in
terms of additional competition, because we
believe that the market has significant pent up
demand.
Emerging demand
He cited Nile Airs upcoming route between
Luxor and Kuwait as evidence of its ability to
react quickly to emerging demand.
However, it was the March 2014 launch of
flights from Cairo to Jeddah that marked perhaps
the biggest milestone in its recent history. Long
restricted to flag-carriers EgyptAir and Saudia,
the market was liberalised with a twice-weekly
Nile Air service, in what Aly described as
genuinely a very big step forward by the
authorities.
Cairo-Jeddah is the single largest route out of
Egypt, and the largest origin and destination
(O&D) market in the Middle East, he noted.
The authorities have realised the benefits of
encouraging the growth of aviation. Theyve
taken proactive steps.
Aly also cited the 2004 liberalisation of all
Egyptian airports outside of Cairo, saying that
the move precipitated 580% growth in overall
flight operations at Alexandria Airport. Talks are
on-going about the possibility of easing traffic
restrictions further in Cairo, as well as permitting
self-handling for ground services by private
carriers.
The pace [of reform] has been slower than in
other countries in the region, but weve seen
positive developments, Aly concluded. We
hope it continues. I think it will be to the benefit
of the economy of Egypt.
Nile is increasing revenues from cargo and
passenger markets with modern comfortable aircraft.
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