Pakistani businessman launches new carrier in UAE

DUBAI, UAE – A 26-year-old Pakistani businessman from Abbottabad, Malek Naureed Awan, is set to launch an airline in the UAE.

MMA Airline has been registered with the Ras Al Khaimah Free Zone, from where it received its licence as a company last month, Awan, the airline’s Chief Executive Officer, told Gulf News.

“We have also received an Air Operators Certificate [from the General Civil Aviation Authority GCAA] on March 14,” he said.

An air operator’s certificate (AOC) is an approval granted by a national aviation authority to an aircraft operator to allow it to use aircraft for commercial purposes. This requires the operator to have personnel, assets and systems in place to ensure the safety of its employees and the general public.

The launch event takes place today in Dubai, and the first commercial flights are expected to take off in May.

Awan’s company is investing $50 million (Dh183 million) in the start-up, which will be based in Ras Al Khaimah.

“The total investment is coming from our own resources,” he said.

Awan plans to launch flights from Ras Al Khaimah International Airport to Karachi and Lahore initially and then add destinations in India and other countries when it secures traffic rights.

“We have already acquired two Airbus A320s to start flights. Two Boeing 777-300s are expected to join the fleet when we plan to add more destinations, such as Mumbai after traffic rights are granted,” Awan said.

The UAE already has five state-owned airlines owned by the governments of Abu Dhabi, Dubai, Sharjah and Ras Al Khaimah. The country has, so far, not allowed any private airline to operate scheduled commercial flights.

However, a number of private companies operate freighters and charter flights, including business jet operations such as Royal Jet, ExecuJet and EliteJet.

This will be the first private commercial airline to operate from the UAE.

“This new start-up airline has the potential to cause serious damage to RAK Airways, who have only just restarted operations after collapsing the first time around,” Saj Ahmad, Chief Aerospace/Airline Analyst at the UK-based StrategicAero Research, told Gulf News.

Low cost

“That said, it’s clear this new Pakistani-backed carrier is looking to poach traffic from cost-conscious Pakistani nationals living and working in the UAE, albeit away from the congestion and high competition seen in Abu Dhabi and Dubai.”

With two A320s to start operations, it’s not clear whether the company has the finance, or another avenue, to source more jets as they plan to expand operations.

“The desire to add 777-300s equally raises eyebrows. It’s not like it will get the traffic rights to India, particularly when other, bigger and more successful UAE-based carriers haven’t had much luck. There may well be an element of over-exuberance to cause a stir in the market,” Ahmad said.

“Whether this airline can succeed depends largely on whether it carves out a niche for itself or whether it’s at the expense of RAK Airways. Right now, there are a lot of questions and little substance to these ambitious plans.”

The airline is being launched at a time when western airlines are struggling to survive while regional carriers are recording strong growth. Emirates and Air Arabia are making increased profits and Etihad has just become profitable.

The International Air Transport Association (IATA) this week announced a downgrade to its industry outlook for 2012 primarily due to rising oil prices. IATA expects airlines to turn a global profit of $3 billion in 2012 for a 0.5 per cent margin.

The $500 million downgrade from the December forecast is primarily driven by a rise in the expected average price of oil to $115 per barrel, up from the previously forecast $99.

“[The year] 2012 continues to be a challenging year for airlines. The risk of a worsening Eurozone crisis has been replaced by an equally toxic risk — rising oil prices. Already the damage is being felt with a downgrade in industry profits to $3 billion,” said Tony Tyler, IATA’s Director General and CEO.

Profits

Middle East carriers are expected to see profits of $500 million (up from the previously forecast $300 million). Financial performance was already seen to be better than previously expected in 2011, with an upgrade from $400 million to $1 billion. In the passenger business, load factors have improved by a slowdown in the introduction of new capacity. Long haul markets too have been relatively robust.

However, for MMA Airline, the challenge will be to attract passengers from Dubai, Sharjah and other neighbouring emirates — home to a large number of South Asian expatriates.

“We are going to offer free bus shuttle services to our passengers from Dubai and Sharjah, Awan said.