7 years after the foundation of the United Arab Emirates (UAE)’ Sharjah-based Air Arabia, the 1st budget carrier in the Middle East, another low-cost carrier in the region suspended services Tuesday. Sama Airlines from Saudi Arabia grounded its fleet; the airline was running out of cash.
Sama, founded in Y 2005, flew to 10 destinations within Saudi Arabia and neighboring countries, offering 164 flights per week with six Boeing 737-300 planes.

In February this year, it already halted flights to 5 Saudi cities after the financial crisis took its toll, triggering losses of US$266M, according to local media reports.

Low fare airlines, although at first reaping benefits from the financial crisis, reported weak results for Q-2 of this year.

Air Arabia, which has listed shares at the Dubai Financial Market, saw a decline of Q-2 profits of 44% to 50M Dirhams (US$13.63M), compared to a profit of 90M Dirhams (US$24.54M) to the corresponding period in Y 2009.

Jazeera Airways from Kuwait suffered a loss of US$16.4M in Q-2.

“I do not see any form of consolidation in the Middle East airline industry in the next seven years,” Jazeera Airways CEO Stefan Pichler said in December 2009, when he opened a travel shop near Dubai International Airport.

Pichler might have to adjust his point. According to speculative media reports, Sama might be taken over by competitors. But Air Arabia denied in a media statement Tuesday any intention to take over another airline.

Other market participants in the low-budget segment are NAS Air from Saudi Arabia and FlyDubai, which is part of Dubai’s Emirates Group.

In a region where big players such as state-owned carriers Emirates Airlines from Dubai, Abu Dhabi-based Etihad Airways and Qatar Airways are expanding with stop-watch speed, the case of Sama triggers questions over the sustainability of the low-cost model.

Emirates aims to add 2 planes per month until September 2011. The carrier, which completes 25 yrs of operations this October, has a fleet of 142 planes and 197 on order and flies to 99 destinations worldwide.

The emirate of Ras al-Khaima, a member of the 7 member federation UAE, made a surprising announcement at the beginning of this week, saying it will re-launch regular operations of RAK Airways in the September-October period, but not as a low- cost airline.

The UAE’s 5th airline began running a charter-only service in May 2009 when it suspended its regular flights.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Aug 25th, 2010and filed underLatest News.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site