Air Arabia began as a government-owned startup in 2003 operating two leased Airbus A320 jets in the UAE. Its pricing strategy focused on offering affordable fares up to 40% lower than regular economy fares to gain market share. Through cost-cutting measures like efficient aircraft choice and fuel hedging, Air Arabia has expanded to over 100 destinations with 44 jets. It has maintained its position as the largest low-cost carrier in the Middle East through customer-oriented priorities like online booking and focus on customer loyalty. While competitors could adopt the low-cost model, Air Arabia's adaptation to challenges like fuel prices has allowed it to succeed where others may hesitate to enter the low-cost market.

1. Air ArabiaPricing Strategy Case Study

3. ● Started as Government owned Startup
● Founded in February, 2003
● UAE’s third airline
● With 2 leased A320 jets
The Start

4. Unique Selling Point
Affordable Fares
Good Service
Great Experience

5. Pricing Objective
● Always catering to low cost market - 40% lower fares than
regular economy fare
● Gain maximum market share - 85% of the regional market
share

6. Quick Accomplishments
● Expansion to nearly 100 destinations with 44 Airbus A320 jets
● Price leadership in Middle East
● First & largest Low Cost Carrier in Middle East & North Africa

7. Road to Success
Cost Cutting Strategies

8. Airbus A320
● 32- inch seat pitch
● Wider aisle
● Larger cabin space
● Best legroom

9. Choice of Aircraft
● Started with 2 leased A320 jets now has only A320 jets
● Reduced boarding time & flight congestion
● Lowered training expenditure

10. Technological Adaptation
● Equipped jets with sharklet technology
● Results :
- 4% reduction in emissions
- increase in higher takeoff weight

11. Other Smart Measures
● User-friendly online booking service
● Edge cutting mobile Web site
● Reducing turnaround time at airports
● Keeping planes in air

13. Cost Change Adaptation
● Air Arabia foresaw fuel price fluctuation
● Used price hedging strategy
● Continued to present low fares to maintain customer loyalty

14. Overall Picture
Great flying
experience
Low Fares
Good Customer
Service
Cost cutting
strategies
Customer
oriented vision
Customer
Loyalty

15. Expansion
● 5 Hubs - Nepal, Morocco, Jordan, Egypt and UAE
● AED 12 billion - total assets
● 124 global routes
● AED 509 million - net profit for 2016
● 65 million passengers

16. Awards
● Low Cost Carrier of the year for 3 consecutive years
● Airline Business Award
● World Airline Award for best Low Cost Carrier
● Air Arabia Group’s CEO was named Airline CEO of the year

17. Questions from “Marketing Management” by Philip Kotler & Kevin Lane Keller, 15th
Edition

18. Why don’t other Airlines apply the same model as Air
Arabia?
● Other airlines targeted customer luxury hence shifted to a
hybrid business model
● Air Arabia targeted people who cannot travelling at normal
prices
● Other airlines lowering the fares may indicated the negative
image showing their incapability

19. Will the company continue to maintain its position in
the market? What happens if others apply the same
model?
● A possibility of new entrants or lowering of fares by other
airlines always exist
● Air Arabia has brilliantly managed to overcome barriers like fuel
price fluctuations and always adapted new technologies to
deliver best service to its customer
● Seeing this, other airlines might get hesitant to enter the lost
cost market

20. Thank you !

21. Disclaimer
The presentation was created by Shruti Madavi, IIT Bombay under
the guidance of Prof. Sameer Mathur, IIM Lucknow