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Global investors opt for low-cost carriers amid pandemic

By Kelvin Osa-Okunbor

 

Investors across the globe are exploiting the opportunities provided by ongoing pandemic to set up low-cost carriers.

The investors are latching on lower costs for aircraft lease rentals, which according to experts is a substantial cost advantage; lower wages for airline crew personnel, which has been placed on furlough and a huge pool of experienced pilots, cabin crew and mechanics looking for new jobs, even at lower salaries than they earned at their old employment.

Besides, there are other suppliers to airlines likely willing to agree to favorable deals.

Investigations by The Nation show that despite the debilitating effects of the pandemic, which has triggered the collapse of over 30 airlines, including Air Asia, Japan, Air Italy, Avianca, Flybe, Germanwings, LATAM Airlines, NokScoot and South African Airways a list of over 30 new low-cost airlines are fledging.

Sources hinted that Nigeria is among countries where investors are firming up plans to set up at least five new carriers, namely Green Africa Airways, United Nigeria Airlines, Cally Air, Value Jets Airlines NG Airlines and many others are the concluding stages of certification.

Nigeria-based Low Cost Carrier ( LCC) Green Africa Airways is planning to launch flight soon. With its crew already trained , the airline is firming discussions with aircraft maker : Embraer for regional jets as it is concluding certification process with industry regulators – NCAA.

Besides, Green Africa Airways, United Nigeria Airlines, Cally Air and others are ramping up efforts to flag of flights in the first and second quarters of 2021.

Also, the road appears clear for another start up carrier NG Airlines, programmed to start operations from the current, government acquired carriers – Aero and Arik Air.

Though over 30 carriers went under last year, no thanks to the coronavirus pandemic.

But,  the airline industry has assumed new dimensions with a substantial number of new carrier projects lined up and waiting for the right moment to launch their first flights.

”We are forecasting more airline startups in 2021 than failures in 2020,”said Domhnal Slattery, Chief Executive Officer  of lessor Avolon, adding: “There will be new winners.”

New airlines should have a substantial cost advantage—and not only in aircraft rental rates in pay packet and other deals offered by suppliers to airlines.

In the United States  , for instance , Breeze Airways intends to operate Embraer 190s before taking its first Airbus A220s.In the U.S., by far the most promising , new entrant is Breeze Airways, the Salt Lake City-based startup founded by David Neeleman, serial airline entrepreneur and founder of JetBlue Airways.

Neeleman hopes to replicate the success of his previous companies by introducing low-cost, nonstop services to midsize U.S. markets that are underserved by other American carriers.

While sticking to that core strategy, Neeleman modified Breeze’s business plan repeatedly over the last year, as the COVID-19 pandemic upended aircraft pricing, travel habits and the air transport industry writ large.

Breeze postponed its planned launch date from October 2020 to March 2021 and now aims to debut with commercial service instead of charter operations, as originally planned.

The company also has readjusted its fleet plans as lease rates and aircraft values swooned.

It now expects to start flying with 15 Embraer 190s and 195s sourced from Nordic Aviation Capital and Azul.

Investigations reveal there is no shortage of ambition among startup airlines in Latin America, as new carriers are working to launch in Brazil, Colombia, Ecuador and Peru.

ITA Transportes Aereos plans to begin services in Brazil during 2021 with Airbus A320s.

The airline is a branch of Brazilian transportation company Itapemirim Group. Another aspiring operator in Brazil, Nella, will reportedly operate ATR turboprops.As Colombia’s largest airline, Avianca, restructures in Chapter 11 bankruptcy protection, a new ULCC operator is working to start service in the summer of 2021. Ultra Air, headed by Viva Air Colombia founder William Shaw, would like to build a network of 29 domestic and 15 international routes supported by narrowbody aircraft. South American ULCC JetSmart also has expressed an interest in Colombia and has outlined plans to establish an operation in Peru.

In Croatia, ETF Airways—”ETF” , which stands for “easy to fly—is planning to receive its first aircraft in March. It will be a Boeing 737-800 leased from AerCap.

Operations are expected to begin late in April.

The aircraft will be used for charter flights under lease arrangement covering aircraft crew maintenance and insurance described as ( ACMI). For the former, ETF intends to focus on routes from Croatian Adriatic coast cities such as Dubrovnik, Pula, Split and Zadar to airports in France, Germany and the UK.

The fleet is expected to comprise two 737s by next summer, three early next year and seven aircraft in 2025.

Private investors and Croatia-based investment funds are said to be supporting the initiative.

In Europe , The Iberostar hotel group is launching its own carrier, World2Fly, with a leased, new Airbus A350.

In the Asia – Pacific region – Air Sial has started operating on Pakistani domestic routes.  Based in Sialkot, Pakistan, and owned by the city’s chamber of commerce.

In , Hong Kong-based Greater Bay Airlines (GBA) intends to begin operations this year, although the specific timeline remains uncertain because the carrier has yet to gain its AOC.

The LCC plans to start with three leased Boeing 737s. However, it has ambitious plans to expand to up to 30 aircraft by 2025.

 

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Source: The Nation

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