Are Abu Dhabi’s two new LCC’s still on track despite COVID-19?
At the end of 2019, it was clear that in the fall of 2020, a rumble in the deserts of the United Arab Emirates (UAE) would commence. On one side of the ring would be Air Arabia, with its tag team partner, the illustrious Etihad. On the other side of the ring: Wizz Air, partnered with the Abu Dhabi government, which is undertaking the Ghadan 21 program to accelerate Abu Dhabi into new heights on the global map.
The once-in-a-lifetime fight between Air Arabia Abu Dhabi and Wizz Air Abu Dhabi was set to commence with eerily similar opposition. The two new low-cost carriers were committed to the Airbus A320 program, both are backed by the Abu Dhabi government in some shape or form and both are going to be managed by well-established brands in the no-frills environment.
But the rumble started to crumble. On April 13, 2020, Air Arabia joined the ranks of many airlines, including those in neighboring Emirates, namely the Dubai-based Emirates Airlines, to ask for financial aid, reported Bloomberg. Air Arabia Abu Dhabi, which was supposed to start operations in June 2020, was put on hold due to the crumbling demand for air travel and the subsequent financial difficulties that air carriers continue to face.
Or at least it started to crumble on a first sight. On April 14, 2020, an Air Arabia spokesperson stated that there are no “plans to delay or postpone,” adding in that work before the first flight “remains in motion and will progress as the market situation improves,” reported Reuters.
On the other side of the ring, Wizz Air and Abu Dhabi Developmental Holding Company (ADDH) still sat firmly on their plans. The two sides confirmed their previously announced agreement on March 2, 2020, and began the process to obtain an Air Operator’s Certificate (AOC) from the UAE’s General Civil Aviation Authority (GCAA).
Despite the latest developments at Wizz Air, the purple-livery airline confirmed that the “launch of operations of Wizz Air Abu Dhabi is progressing in line with the initial timeline.”
The investor update, however, included some grim information. Currently, the low-cost carrier has slashed 97% of its capacity and as of April 14, 2020, expects its FY2020 profits to be lower by $76.7-86.7 million (€70-80 million) due to the fact the company had to recognize exceptional losses in Q4 FY2020 “related to hedging losses for the months of March to May 2020.” Furthermore, the company is looking to lay off 19% of its total workforce, equaling to about 1,000 employees. The salaries of pilots, cabin crew and office staff will be reduced by 14% on average, while senior management’s, including the CEO and Board of Directors, will be cut by 22%.
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