Market Potential & Competition
Total passengers travelled between the U.K and Pakistan in the year 2013 by air were 1,247,200 out of which about 520,000 were carried by PIA, about 205,700 by Emirate Airline, about 127,900 by Gulf Airline, 71,750 by Saudi Arabian Airline, 95,120 by Qatar Airways, 162,850 by Etihad Airline and 38,530 by Kuwait Airways and 25,350 by Turkish Airlines from the U.K alone.
The UK - Pakistan route is the busiest route with over 1.50 million passengers carried in 2016.
Given that no British or European airline currently serves Pakistan route from the UK, Saif Air will be uniquely positioned to take advantage of the unserved demand that exists.
Across Pakistan’s international airports, about 7.98 million of passengers were travelled on international flights annually. International passenger demand increased by 4.9% in 2009 to just under eight million passengers of which Pakistan International Airways (PIA) carried around 45%. However, when combined with Pakistani carrier air blue, Shaheen Air International and other international carriers had around 56% of the total
international market. (* See Exhibit 1)
Saif Air has already been assured of landing and take-off slots at London Stansted and Manchester airports for its proposed flights.
After launching ISB & LHE route, Saif Air will then be able to expand by targeting other attractive routes of India (Amritsar), Sylhet (Bangladesh), Colombo (Sri Lanka), USA (New York and Chicago) and Canada (Toronto), depending on the regulatory environment. Saif Air will also be able to target Middle East, Saudi Arabia for Umrah and Hajj routes offering an enormous potential for growth and an important competitive advantage.
UAE routes dominate international market
Examining weekly seat capacity for the first week of April 2016 reveals how big a role the UAE plays in international traffic to and from Pakistan. The market is twice as big as the second biggest (Saudi Arabia) with both markets fairly equally split between Pakistani carriers and those from the destination market. Several routes to the UAE are served by four carriers, such as Islamabad to Dubai where Airblue, Emirates, PIA and Shaheen Air all compete for customers.
The UK – Pakistan market is dominated by PIA, at least since British Airways stopped operating between London Heathrow and Islamabad in September 2008. PIA operates twenty-two non-stop flights between the two countries and serves three UK airports Birmingham, London Heathrow and Manchester from Islamabad, Lahore and Karachi. According to UK CAA data, the UK – Pakistan market grew by 8.2% in 2016 to almost 1.50 million passengers. We believe that approximately 48 percent of above passengers had traveled to Pakistan with Middle Eastern Airlines.
Saif Air has already been assured of landing and take-off slots at London Stansted and Manchester airports for its proposed flights.
Source: OAG Max online for w/c 4 April 2014
Segmentation by Weekly Frequency
These airlines operate out of Heathrow, Gatwick, Manchester, Birmingham and Glasgow airports with wide-body aircraft (B777s, A330, A380) in a two- or three-class configuration. PIA is the only airline offers direct non-stop flights, all other Middle Eastern airlines offer indirect flight services through their own countries
By targeting such a dense route, Saif Air’s initial market will not be significant enough to be considered as a threat by other major competitors, existing players will only be able to react with price which is the only one aspect of the Saif Air concept and by no means the most important.
The last ten years have witnessed significant traffic growth. This growth has been primarily driven by higher individual disposable income due to economic growth resulting in increasing affordability, changing in consumer lifestyle due to globalization. According to a conservative estimate air passenger market between UK & Pakistan is more than 1.50 million passengers per year. Based on IATA statistics, Pakistan is projected to achieve annual growth rate of 8.2% in the passenger market and 8.8% growth in the cargo segment respectively, hence leading the growth in the Asia Pacific region in the coming 5 years.
South Asian Expatriates
As Saif Air is a British carrier that’s why expatriates residing in the UK, in other European countries will feel a unique sort of comfort to get into the British Airline. Saif Air will not just be an airline but also will act as the ambassador of United Kingdom in its target market.
The existing market segmentation strategy of Saif Air is reasonable enough because it covers all necessary parameters that are to be focused in doing market segmentation for Airline Company.
Segmentation by Population
Economic growth and the requirements for redevelopment in South Asian countries is creating an increased demand for air services between the U.K and these countries. The UK's minority ethnic population grew by 5.3% per year for the past ten years period from 1991 and 2001 to 4.6 million. South Asians (Pakistani, Indians and Bengalis) account for 50% of the total ethnic population 2.30 million (Census 2001). Keeping that annual growth of 5.3% the estimated ethnic population in 2011 should be 7.71 million, about 50% of that population is consist of Pakistanis, Indians and Bengalis to 3.85 million.
The accompanying market analysis table and chart below show total potential markets based on estimated population in each segment, as well as potential growth rates in air travel in Saif Air's target market region within those segments, Over-all make-up of the airline's anticipated passenger loads by market segment are presented below.
Segmentation by Airlines
In this target region, the major carriers dominate the airline industry, that has room only for major players or smaller speciality participants. There are two specialty segments that have characteristically been exploited by Saif Air. One is the affordable fare and the other one is the Premium Service. One focuses on charging less, the other one providing direct non-stop service between the two points (the "feeder" concept like BA on UK/Pakistan route).
Total tourist’s arrival in the year 2016 by air was over 1.50 million out of which about 761,850 to Islamabad, about 333,990 to Lahore, 309,443 to Karachi and 107,967 to Peshawar. Thus, it is clear that Pakistan has over 1.50 million air passengers in a year which is constantly increasing.
London Stansted Airport & catchment Area
The London Stansted catchment area sits in the UK’s wealthiest region. Excluding Central London, total population of Stansted's catchment area is 25 million is 2-hour radius. The catchment area includes Essex, Suffolk, Norfolk, Cambridgeshire, Northamptonshire, Leicestershire, Lincolnshire, Bedfordshire, and Hertfordshire, Chelmsford, East London, North East London having majority of South Asian population who frequently travel on family holidays and other religious occasions. Total South Asian population from these areas is amounting to 222,000 Bangladeshi, 224,000 Pakistani and about 543,000 Indian, totalling around one million.
The most interesting region of Stansted's catchment area is East London, North London. Over the past few years, East London has transformed itself into the home of fast-growing high technology companies. Over 1,200 companies employing over 35,000 people are based in the East London/North London area
London Stansted is London's third international gateway and one of the fastest growing airports in Europe. Growing at over 30 percent per annum, it serves about 23 million passengers per year.
In 2014, 2.65 million passengers in London Stansted's catchment area travelled to South Asian countries. (source: CAA). These passengers will naturally prefer flights from London Stansted. The low-cost airlines operating out of London Stansted—Ryanair, Easyjet, Go Fly, and Buzz—are all recording an increase in business travellers.
The Stansted Express rail link runs every 15 minutes to/from Liverpool Street Station (heart of the city of London) right into the terminal building at Stansted airport. Travelling time is 41 minutes. Passengers working in London will be able to leave their offices 70 minutes before take-off time, a convenience no other airline can offer. Has a high-speed rail and motorway links direct to the heart of the City in just 45 mins.
London Stansted Airport is a fantastic alternative to London Heathrow. Clearing customs takes five minutes, and the Stansted Express is very efficient. London Stansted Airport also offers easy onward travel facilities to Cambridge, Ipswich, and Norwich either by road, train, bus, or coach.
Stansted Heathrow Gatwick
London (Financial District) 41 min 60 min 50 min
Canary Wharf 90 min 90 min 80 min
Cambridge 30 min 80 min 90 min
London Olympic 2012 Village 40 min 60 min 90 min
Focus on Point to Point Traffic
While Saif Air will focus primarily on point to point service. In order to increase load factors, Saif Air will benefit from connecting traffic originating in secondary cities in the U.K., Europe, USA and Canada. The South Asians travelling to/from their countries will easily combine European flight into London Stansted or Manchester with a Saif Air flight to Pakistan. The following table highlights the various countries that are served by European airlines operating at London Stansted and Manchester and with arrival and departure times within 2 hours of a Saif Air flight:
The following table highlights the various secondary cities that are served by airlines operating at Stansted.
Ryanair Copenhagen, Berlin, Dublin, Stockholm, Rome, Frankfurt, Madrid, Barcelona, Belfast, Venice, Oslo, Budapest, Naples, Oslo,
Eurowings Munich, Cologne, Stuttgart,
Easyjet Edinburgh, Glasgow, Amsterdam, Geneva, Sofia,
Jet2.com Amsterdam, Barcelona, Belfast, Berlin, Budapest, Copenhagen, Edinburgh, Geneva, Glasgow, Leeds,
Thomas Cook Airlines Orlando, Los Vegas, New York and Barbados,
TUI New York, Miami, Boston, San Francisco, Los Angeles and Las Vegas
Wow Air Amsterdam, Barcelona, Berlin, Boston, Brussels, Chicago, Copenhagen, Dallas, Detroit, Dublin, Düsseldorf, Edinburgh, Frankfurt, Los Angeles, Lyon, Miami, Milan, New York, Paris, Toronto, Stockholm and Washington DC
Manchester Airport & Its Catchment Area
Train Services Frequent services run to and from the airport, around the clock, 7 days a week with First Trans Pennine Express and Northern Rail. Cheap train travel is available from Manchester Airport’s transport hub The Station, providing cheap train tickets in association with Train line, particularly when booking in advance.
Train services run frequently 7 days a week through national train operators 'Trans Pennine Express' and 'Northern Rail'. Trains run every 10 minutes to or from Manchester Piccadilly, with an average journey time of 20 minutes, while there are dedicated lines running to other major cities.
Coaches at Manchester Airport
A large number of coach services operate daily from 'The Station' at Manchester Airport, the integrated transport hub, linking Manchester Airport with our region and other major UK cities.
National Express, the UK's largest operator of scheduled coach services, operates at Manchester Airport. National Express offer low fares, providing great offers if you book in advance. Destinations include: Birmingham, Liverpool, London, Edinburgh and Glasgow.
Manchester have a huge catchment area of South Asian population. The Manchester catchment area includes Central Manchester, Stockport, Bolton, Huddersfield, Leads, Bradford, Oldham, Bury, Rochdale, Derby and Preston.
The following table highlights the various secondary cities that are served by a low-cost airline operating at Manchester and with arrival and departure times within 2 hours of an Saif Air flight:
American Airlines Albany, Baltimore, Boston, Buffalo, Cleveland, Los Angeles, Philadelphia, Pittsburgh, San Juan (P.R.), Washington
Delta Albany, Atlanta, Baltimore, Boston, Los Angeles, Philadelphia, Pittsburgh, Washington
United Airlines Boston, Los Angeles, Washington, D.C.
Air Canada Toronto, Vancouver, Montreal
Flybe Glasgow, Amsterdam, Belfast, Aberdeen, Southampton, Paris, Dusseldorf, Aberdeen
Air Transat Toronto, Vancouver, Montreal,
Lufthansa Munich, Frankfurt
Air France Paris
Ryanair Rome, Barcelona, Dublin, Cologne
Easyjet Berlin, Amsterdam, Hamburg, Athens
Competitive advantage over incumbent carriers
The major competitive advantage to Saif Air is the absence of British Airways (BA). There is no other European airline currently operating to Pakistan. There are 0% direct flights from any British or European carrier on this sector.
Another competitive advantage over these airlines is that these major airlines often suffer from the lack of flexibility. The Middle Eastern Airlines focus almost exclusively on their own core regional service. They are, though slightly cheaper (not always) but the travel with them is very troublesome, especially for those passengers who travel with large families, children and elderly passengers. They look for direct non – stop flights.
PIA is facing serious problems. The major problems faced by PIA are the increase in oil prices, over staffing, devaluation of local currency, political appointees and interference and its weak financial position. Since the last decade PIA has suffered huge losses of more than 64 billion rupees (£475 million) from 2005 to 2015. It is, now, just like a white elephant. The bad governance, poor performance and corruption are the major causes of its failure. The Pakistan International Airlines is a big organisation with more than 14,000 employees, which has earned PIA the unpleasant distinction of being an airline with the largest number of employees on its payrolls per aircraft. Once PIA was known all over the world for its excellent performance and superior quality. That was the golden period for PIA. But now it has lost its luster.
Major airlines have large overhead costs and many are tied in to labour contracts which prevent them from reducing these costs significantly.
Saif Air will offer non-stop flights between UK – South Asian Countries which will offer significant time savings for our passengers. The UK/Pakistan opportunity is likely to be free from imposing competition unless it comes from another start-up. If Saif Air is able to attack the market first, it will be difficult to be beaten.
UK – Pakistan travel market is very competitive and over the period of last ten (10) years, many airlines especially Middle Eastern airlines, have increased their capacity in the market but the fares have not been reduced. Saif Air believes that it is the best strategy to start competing on the busiest route, where there are no direct flights from the UK and other European countries, where a big opportunity exists for direct non – stop flights. It will be difficult for established airlines to react in such a dense market. With higher fixed costs and larger market shares, established players will not even feel the pinch of it. The cost of competing on price would by far outweigh the cost of accepting a small erosion in their market share.
In order to remain competitive, corporations have become more cost conscious and have taken steps to tighten their travel and entertainment budgets, often by requiring their employees to travel on a specific airline or in a lower class. Saif Air believes there is a fantastic opportunity available to create a three-class premium airline that will bridge the growing gap between business and economy class travel. London Stansted and Manchester Airports offer attractive opportunities for travel to Islamabad and Lahore, the most popular airports. There is a great opportunity by targeting such a dense market
While the overall airline industry is very competitive and many airlines have recently complained of overcapacity in the market, fares have only been reduced in the economy class where we tend to see a larger portion of deeply discounted fares. Saif Air believes that it is the best strategy to start competing on the busiest route where there is no direct non – stop flights and where we only need a small share of the market to achieve profitability. Saif Air's initial share of the market will be approximately 10 percent. It will be difficult for established airlines to react in such a dense market. With higher fixed costs and larger market shares, established players will be reluctant to do so. The cost of competing on price would by far outweigh the cost of accepting a small erosion in their market share.