Case Summary

• Successfully living up to its tagline of “pay less fly more”, Air Arabia is
one of the most affordable airlines in the Middle East.
• For years now, Air Arabia has been offering an award winning airline
experience that focuses on offering comfort, reliability and value-for-
money air travel.
• They have tried to make affordable air travel well within reach for
people who couldn’t afford them earlier.
• They focused on improving connectivity over the region with an aim to
expand operations.
• Air Arabia being the First and largest Low Cost Carrier in the Middle
East and North Africa have put themselves ahead of their competitors.
• The demand for the company’s services rose in 2010 which led to
increase in the Net Profit of the company in third quarter to AED 136
million.
• Carried out targeted cost cutting strategies to maintain themselves as
a LCC
• Known famously for their fuel hedging tactics which successfully helped
Air Arabia prevent any backlash from fuel price crises.
• Putting the customers first has always been the number 1 priority for
Air Arabia.
• Adopting a new toll free number to refrain from incurring extra costs,
adding a loyalty rewards program helped Air Arabia come off as a
customer centric brand that stuck to its core vision of being a LCC.
• They offer spacious economy cabin, world class comfort seats,
activities to engage the customers both onboard and on ground which
led to an overall great flying experience at a low fare.
• This has led to Air Arabia cementing its position as Middle East and
North Africa’s leading LCC
Company History
• Air Arabia was established on 3 February 2003 by an Amiri decree issued by Sultan
bin Muhammad Al-Qasimi, the Ruler of Sharjah and member of the Supreme Council
of the United Arab Emirates, becoming the first low-fare airline in the Middle East.
• The airline started operations on 28 October 2003. The airline broke even during
first year of being in business. It launched an initial public offering for 55% of its
stock early in 2007.
• In March 2014, Airbus delivered its 6000th A320 family aircraft to Air Arabia.
• In 2015, Air Arabia rolled out the AirRewards program, the first loyalty programme
by a low-cost carrier in the Middle East and North Africa region. Points can be
earned and shared with anyone, AirRewards points act like a currency for the airline.
❑Air Arabia has created joint ventures at four international bases. The following
countries have had or still do have JV airlines based there:
• Abu Dhabi
Air Arabia Abu Dhabi (2020–present) Air Arabia Abu Dhabi was launched in
July 14,2020 and is the capital’s first low-cost airline, connecting Abu Dhabi to
even more destinations around the world. Air Arabia Abu Dhabi was formed
following an agreement by Etihad Airways and Air Arabia to establish an
independent joint venture company that will operate as a low-cost passenger
airline with Abu Dhabi International Airport as its hub
• Egypt
Air Arabia Egypt (2010–present) - On 9 September 2009, Air Arabia
announced Air Arabia Egypt as a joint venture with Egyptian travel and
tourism company Travco Group to be based in Alexandria, Egypt. The airline
received its operating license on 22 May 2010, with commercial flights
beginning 1 June 2010.
• Jordan
In January 2015 Air Arabia announced the acquisition of a 49% stake in Petra
Airlines. The principal shareholder of Petra Airlines, the RUM Group, retain a
51% stake in the airline, which will be rebranded as Air Arabia Jordan in early
2015 .The first flights of the new airline took place during the week commencing
18 May 2015, with launch destinations being Kuwait, Sharm El Sheikh, Erbil,
and Jeddah Air Arabia Jordan ended operations in 2018.
• Morocco
Air Arabia Maroc (2009–present) - Air Arabia, in a joint venture with
Moroccan investors established Air Arabia Maroc and set up a secondary base
in Morocco's largest city, Casablanca. It began operations in May 2009, allowing
Air Arabia to expand into Europe and Africa.
• Nepal
Fly Yeti (2007–2008) - In 2007, Air Arabia opened a base in Nepal's
capital Kathmandu to serve Asia and the Middle East, after signing a joint
venture agreement with Yeti Airlines. It established a low-cost carrier, Fly
Yeti, that provided service to international destinations. Due to the uncertain
political and economic situation prevailing in Nepal and lack of local government
support, FlyYeti operations were suspended in 2008.
Vision Mission Objective
VISION AND MISSION
• “To be one of the world’s leading budget airlines”.
• In terms of:
• Profit Margin
• Innovation
• Reputation
• Operational Excellence

• “To revolutionize air travel in the region through

an innovative business approach offering superb
value for money and a safe, reliable operation”.
Core Values

• Providing better work environment

• Taking responsibility and lead on social needs of local and international
communities
• Corporate social responsibility (CSR) program- Charity Cloud project in
collaboration with Sharjah Charity International
• Emphasis on providing better education and healthcare for underprivileged
communities.
 Objectives

• Offering the lowest fares in the Middle East region

• Focusing on lowering the costs.
• Introducing continued operational efficiencies.
• Offering point to point service
• Maintain the leader position and stay profitable:
• Increase the flying frequency of existing destinations and add more
destination routes
• Expand fleet within the next few years.
• focuse on taking measures to preserve liquidity
• gradually resume operations where possible.
SWOT Analysis
 S W O T

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

• First mover advantage • Lower number of aircrafts • Expansion of markets • Strong competition
• Management structure • Single type of Aircraft • Extension of Sharjah Hub • Rise in fuel prices
• Well established base • No ground handling • Growth in Tourism sector • Inability to respond
• Low price service • Mergers and acquisitions dynamically
Strengths
• First mover advantage
• Experienced management structure
• Well established base at Sharjah Hub
• Low price

Weakness
● Lower number of aircrafts
● Uses a single type of Aircraft
● Do not own any ground handling service
Opportunity
• Extension of Sharjah Hub
• Tremendous growth in Tourism sector
• Mergers and acquisitions with hospitality companies

Threat
● Strong competition from other airlines
● Rise in fuel prices
● Inability to respond dynamically
Product Line
Product line
Product line
Marketing Mix
&
STP Analysis
Marketing Mix

1. Product(Service): Air Arabia offers many services to their customers according to the target segment
they belong to. They provide with online booking which reduces the time of a customer to go to any
agency and book a flight. Air Arabia also provides with hotel-reservation service and recommends the best
options for customers according to their needs and budgets.
2. Price: Air Arabia is using a low cost strategy, which is to offer lower price than what other airlines in
the market offer. It uses this strategy because it targets people from low to medium-income level who are
willing to pay less in order to fly more.
3. Place: The main base of Air Arabia is in Sharjah, UAE. It has more three hubs which are in Morocco,
Egypt and Jordon. Air Arabia also has an Online Website through which customers can book their flights,
check the latest offers and book an accommodation in a hotel during his/her travel.
4. Promotion: Air Arabia always advertise in local and international, Arabic and English newspapers and
magazines because their target audience are people from all nationalities. It advertises in business, family
and social magazines worldwide to reach their target audience who have different interests. Air Arabia has
created a website offers many services such as the online booking, which allow customers to select
particular seats or service from their home. Furthermore, Air Arabia advertises in many websites from
different fields such as the MSN messenger and the Gulf News.
STP Analysis

1. Segmentation: Air Arabia has been spread worldwide through three hubs namely
Sharjah Airport, Mohamed V Airport in Casablanca and Egypt airport. Air Arabia is in
Travel and Tourism industry which is further divided into Travel industry which provides
with travel facilities to passengers who want to travel to other countries whereas Tourism
industry which help with Hotel reservations.
2. Targeting: Air Arabia targets people with low income who would like to travel the
world which could not be possible as the air freight is high. But nowadays people with
good income have also started traveling in Air Arabia as it helps them to save for better
future.
3. Positioning: Air Arabia has positioned itself in the market in such a way that has kept
it far ahead of its competitors. Air Arabia and Jazeera airways are in competition but still
demand for Air Arabia is high as it provides cheap ticket price.
4. Growth Strategy: Air Arabia has planned to expand its Sharjah hub by Investing 2.0
billion in new aircrafts which will increase the number of planes to 34 by 2015.this
expansion will also increase the frequency of flights on certain routes, i.e. doubling the
number of daily flights in most cases.
Pricing Strategies
Evaluation of Air Arabia's Strategies, Tactics & Prospects

Current Market Situation: Air Arabia being the First and largest Low Cost Carrier in the
Middle East and North Africa have put themselves ahead of their competitors. The company’s
services are being demanded by many customers due to whom in 2010 the Net Profit of the
company in third quarter increased to AED 136 million.
Evidence of Company’s Success: The Company’s profit in the year 2009 was AED 452
million which had been decreased from the previous year. But the company’s growth strategy
shows that it will be successful in the coming years.
Prospects for future growth/success: Air Arabia have invested AED 1.7 – 2.0 billion on
new aircrafts to increase the number of planes by 2015. This investment will increase the
frequency of the flights on certain routes.
Conclusion:
Air Arabia has been growing in Travel and Tourism industry with a vision to offer better
services and to be the best airline on every route it flies by improving a strong network route.
Thus, it has many target segments of people with low to medium- income levels that are
looking for low air fares. The ambition of Air Arabia is a fleet expansion of 50 aircrafts by 2015
and also establishing more hubs to link the whole Arab world to Africa and Europe.
1. Selecting the Pricing Objective
● Survival
● Maximum Market Share
● Product-Quality Leadership

2. Determining Demand
● Observed the demand for budgeted air tickets
● Analyzed the percentage of people who couldn’t afford air fares
● Ultimately targeted 85% potential regional customers who couldn’t afford
flying expenses

3. Estimating Costs
Costs are of two kinds:
● Fixed Costs
● Variable Costs
Air Arabia estimated its Fixed Costs such as aircraft financing, insurance, taxes,
crewmember salaries etc. and its Variable Costs such as fuel, oil, maintenance,
landing fees etc. to analyze the revenue and profitability after incurring such
costs.
4. Analyzing Competitors’ Costs, Prices, and Offers
● Analyzed the Competitors’ Price Mix like of flydubai and flynas
● Observed different business models of its competitors
● Accordingly aimed to set its price 40% cheaper than regular economy
fares

5. Selecting a Pricing Method

Air Arabia opted for Value Pricing wherein it aimed to win customer loyalty
by charging a fairly low price for a high-quality offering.

6. Setting the Final Price

After evaluating the first five steps, Air Arabia takes into account other key
factors like impact of other marketing activities, company pricing policy,
gain and risk sharing pricing etc. and sets different prices for different
destinations.
Reason for Air Arabia’s low pricing
strategy and maintenance
● Careful and Plucky choice of the airbus
A320 combined comfort
● Universal aircraft model lowered their
training expenditure.
● The world's best operator of an Airbus A320
fleet; highest aircraft utilization and
operational reliability
● Opting for brand new fuels has reduced fuel
costs.
● Fuel hedging strategy
● Adopting new technology (Sharklet
technology)
● Reduces turnaround time at airports
keeping planes in the air.
● Airport
Promotional Pricing
 AIR
ARABIA

Q1. Air Arabia has succeeded in profitably challenging

big established airline companies in the Middle East
and North Africa. Why don’t all other airlines apply the
same business model as Air Arabia?
1. SUCCESSFUL
POSITIONING

•Air Arabia is the first and the largest LCC

(Low-Cost Carrier) Company in the MENA
(Middle East and North Africa) region
•The company focuses on providing high-
end services at cheap prices
•And thus , it has successfully positioned
itself
1. SUCCESSFUL
MARKET •Depends more on technology instead of
PENETRATION human resources
•Efficient utilization of technology – Sharklet
Technology, User-friendly software
•Effective pricing strategy – Point-to-point
travels at attractive prices
•Identifying and targeting untapped
sections in the market
•Building a unique brand image – “Pay Less
Fly More”
1. SUCCESSFUL
MARKET
PENETRATION
(contd…)
Q2. What challenges does Air Arabia face? Do you think that
the company will be able to maintain its leadership position
in LCC market in Middle east and North Africa? What will
happen if other companies apply the same business model as
Air Arabia?
Air Arabia faces a lot of challenges. Starting from ownership and
administration as Air Arabia is Government company of UAE so it difficult for
the company management for has less autonomy and since airline industry is
dynamic in nature, decisions has to be taken faster but it is not so the case
for Air Arabia as it has to follow hierarchy which makes difficult for faster
decision making. The Middle east and North Africa always face political
instability which often halts businesses and oil prices are highly fluctuating
and volatile so it is difficult to keep price cheap on the long run. Apart from
this, rigid religious laws and gender inequality also challenges Air Arabia.
The answer is yes as the company has the potential to maintain its leadership
compared to its competitors by successfully hedging oil price thereby
maintaining low price. There might be some short term hurdles by new
entrant but Air Arabia has ability to bounce back to its leadership position.
Other companies may adopt but cannot replace Air Arabia as consumers have
experienced the ambience and prefer to fly with Air Arabia compared to its
competitors and in the long run other airline companies cannot withstand the
market.
Impact of Covid-19
The entirety of the aviation industry has taken a major hit due to Covid-19 struck
pandemic. The industry as a whole has been at a standstill due to The dramatic drop
in demand for passenger air transport due to the COVID-19 pandemic and
containment measures is threatening the viability of many firms in both the air
transport sector and the rest of the aviation industry, with many jobs at stake. The
overall demand for air travel during the months from April to June fell to almost one
third of the previous years demand.
Air Arabia is no exemption of the matter, even though the airline industry is slowly
regaining momentum, it is still not enough for the industry to soar through the
skies.

Air Arabia registered a net loss of AED 44 million for the third quarter ending
September 30, 2020, a direct result of the continued impact of the COVID-19
pandemic on airline operations. The company’s turnover for the third quarter of
2020 registered AED 294 million, and a total of 665,456 passengers were served.

However, Air Arabia official are pleased at the results they were able to produce
given the prevailing circumstances. But the impact of Covid-19 on Air Arabia
employees cannot be overlooked, Air Arabia laid off many employees during this
period. This was due to the reduction in the number of flights and educed number of
passengers per flight.
Conclusion
Air Arabia still being the only listed
company from the UAE was able to
cultivate good relationships with its
consumers by providing quality service
while still operating on a low cost
structure. Providing low cost air travel
while still maintaining a customer
oriented vision has allowed Air Arabia to
establish itself in the regional LCC
segment. Despite facing several
adversities and competition from various
parties, Air Arabia has been able to
maintain its position due to its
unwavering corporate objective.