Air force: New deals and strategies take hold at the emirate’s airport

As the management of Ras Al Khaimah International Airport (RAKI) prepare to celebrate the facility’s 40th anniversary in 2016, they are working to expand its role as a budget airline destination, cargo hub and business centre. The hope is that deals signed in 2014 and 2015 will prove to be significant milestones in the airport’s history.

Air Arabia

The first of these was with Sharjah-based Air Arabia, the region’s biggest budget airline. On May 6, 2014 the airline’s first flight took off from RAKI. One year later, it was operating 10 routes from there: to Kathmandu in Nepal, Muscat in Oman, Dhaka and Chittagong in Bangladesh, Cairo in Egypt, Islamabad, Lahore and Peshawar in Pakistan, Doha in Qatar, and Jeddah in Saudi Arabia. Air Arabia’s opening of operations in RAKI followed a deal in February 2014, when it became RAK’s national airline and designated carrier.

Strong Performance

Partly as a result, 2014 was a bumper year for Air Arabia, which saw net profits rise by 30% to Dh566m ($154.1m) and turnover by 17% to Dh3.7bn ($1.01bn). At the end of the year, during which it carried 6.8m passengers, Air Arabia was serving 101 destinations from five hubs; in Cairo, Amman, Morocco, Sharjah and RAK.

Low-Cost Model

The management team at RAKI believes that to retain Air Arabia’s allegiance and benefit from the airline’s growth, it must adapt the service it provides to meet the needs of a budget carrier. “We want to be seen as the low-cost airport,” RAKI CEO Mohammed Qazi told OBG. “That does not mean we want to be seen as a cheap airport; it means we want to develop a reputation as a cost-effective and efficient airport.” To achieve this aim, Qazi is drawing on lessons learned at UK airports, including London’s Stansted, where he worked with Irish low-cost carrier Ryanair. “Low cost is all about quick and efficient turnaround times,” he told OBG. “We want to process aircraft that come in and go back out within a certain period of time, because we know that the longer the aircraft sits on the ground, the more the costs increase. To do that you have to build an infrastructure that favours the low-cost business model.”

Passenger Numbers

The deal with Air Arabia came at an opportune moment for RAKI and against the backdrop of two significant issues affecting passenger numbers: the abrupt closure of its previous anchor carrier RAK Airways at the end of 2013, and the rouble crisis in 2014. RAK Airways, which had landing rights in Saudi Arabia, India, Pakistan, Nepal and Qatar, ceased operations at the end of 2013, and although RAKI signed a new deal with Air Arabia within two months, the new anchor carrier had no scheduled flights from the airport until May 6, 2014, when its first such flight took off for Jeddah, Saudi Arabia.

Further challenges came later in the year. First, Air Arabia’s planned services to India were delayed as the airline waited for that country’s government to process its application for landing rights. Second, the fall in the price of oil, which began in June 2014 and was followed by a rapid decline in the value of the rouble at the end of the year, caused a slump in the number of passengers visiting the UAE from Russia – Russians made up almost 20% of RAK’s overseas tourists in 2013, according to the RAK Tourism Development Authority. At Dubai International Airport, monthly figures for January and February 2015 showed declines in the number of travellers from Russia and Russian Common-weath countries by 22.7% and 35.6%, respectively, compared to the same months in 2014. With no scheduled flights from Russia arriving at RAKI, the impact was felt in its charter business as well.

The net result of these problems was that RAKI saw its total passenger numbers fall from 434,507 in 2013 to 255,660 in 2014, a drop of 41%. To beat 2013 performance figures in 2015, the airport would have to handle an average of 36,210 passengers a month. Although this number was only surpassed in two months in 2014, namely April and May, Qazi remains optimistic. He said Malaysian Airlines Charter is already operating at RAKI, and that there are deals in the pipeline in 2015 for charters from Russia, Germany, India and Pakistan.

Qatar Airways will also launch daily direct flights to RAK in October 2015 to meet growing demand for travel to and from the UAE. The airline already operates 98 weekly flights to Dubai, 28 to Dubai World Central, 42 to Abu Dhabi and 21 to Sharjah. The addition of seven weekly flights to RAK means the airline will have a weekly total of 196 flights from Doha to the UAE. With Qatar Airways’s new daily flight alongside Air Arabia’s existing and planned new routes, RAKI should be linked to 38 destinations by the end of 2015, according to Qazi.

Cargo Expansion

A second important contract signed in 2015 was for the construction of a new, larger cargo facility at the airport. Under the agreement, Dubai-based SKA International took over the operation of the existing facility on May 1, 2015, and also signed a separate contract to build a new freight complex that will be four times the size of the existing cargo centre. Once it has been completed, it will span 15,000 sq metres, with designated areas for perishables and high-value items, bonded warehouses, and storage for relief supplies. The new cargo centre at RAKI is due to be operational starting in the first quarter of 2016. “We see RAKI as an infrastructure provider for anything linked with aviation or transport,” Qazi told OBG. “From an infrastructure point of view, cargo and logistics play significant parts too. SKA International has a fuel farm here, so RAKI can be packaged as a one-stop shop for fuel and cargo, complemented by the airport’s ground services.”

Special Investment Zones

The cargo facility is being constructed in an area of the airport that has been designated as a special investment zone. Meanwhile, a second such zone is being developed at RAKI to encourage industrial and commercial businesses to locate there, particularly those with a focus on aviation or import-export. There are plans to enhance the road system surrounding the airport area by building an additional exit on the main roundabout that can service the new cargo facility. More broadly, the Etihad Railway, which is scheduled for completion by 2018, could benefit both freight companies and passengers.

Life Cycle Management

Another target revenue stream for RAKI has been the dismantling of aircraft at the end of their life cycle. In 2014, an Airbus A340-500 was dismantled at RAKI. “This has never happened in this part of the world, and has only happened once before anywhere else, so it is a big achievement,” Qazi said. “Now we are looking to expand this service and become the industry leaders in aircraft life-cycle management.” Airbus had delivered 32 A340-500s to international airlines between 2003 and 2010, but these four-engine, long-haul airplanes became victims of high fuel prices, so many airlines replaced them with cheaper two-engine aircraft. Parts from the dismantled aircraft can be used to support other operational aircraft. RAKI hopes that it can provide a similar service to other airlines in the region, enabling them to dispose of unwanted aircraft and recycle reusable parts and base metals.

Looking Forward

In the future, the airport is interested in developing its training capability to service the rapidly growing air hubs developing elsewhere in the UAE.

Qazi sees potential for at least two types of training. “There are a lot of new aircraft coming into service in the region, so air crews will need to be trained for these,” he told OBG. He added that there is a considerable market for safety and security training for people working on the ground and in any business at the airport. “As an airport business you have to invest not only in your training but also in your trainers, because the regulator requires this. There is also a constant evolution in safety bulletins and updates in response to new and evolving threats.”

RAKI is therefore set to benefit from a number of projects in the short to medium term. With land connectivity increasing through expansion of the E611 highway and Airport Road, accessibility for passengers will be greatly enhanced in 2015 and 2016. With electricity systems upgraded, RAKI is embarking on new projects, including a VIP terminal for business aviation, expansion of the arrivals terminal and a terminal that connects departures and arrivals. When these expansions are finished by the end of 2016, the airport should be ready to handle higher volumes of flights, as well as welcome investments to its special investment zones.