THE MOROCCAN MARKET
The national airline of Royal Air Maroc has signalled its intention to takeover TUI owned carrier Jet4you allowing Royal Air Maroc a new low cost division to combat the growing low cost influence in Morocco, particularly on the key Morocco to France market.
The Moroccan market has seen huge changes over the last five years due to the rise of the low-cost carriers, notably easyJet and Ryanair. Now, with Air Arabia Maroc having established a base in Casablanca, the low-cost trend in Morocco looks set to increase.
In terms of weekly seat capacity, the Moroccan market has grown by 42% due to significant low-cost growth since 2005 but Royal Air Maroc has lost out in terms of market share in the past five years.
The table below illustrates the current leading five carriers in terms of weekly seat capacity in the Moroccan market:
|
Carrier |
Weekly Seats |
Destinations from Morocco |
Market Share |
|
Royal Air Maroc |
101,896 |
73 |
55% |
|
Ryanair |
21,924 |
17 |
12% |
|
easyJet |
10,268 |
6 |
6% |
|
Jet4you |
7,878 |
12 |
4% |
|
Air Arabia Maroc |
6,132 |
11 |
3% |
|
Others |
38,094 |
20% |
|
|
Total |
186,192 |
100% |
Source: Flightbase September 14-20, 2010.
During the same time period in 2005 (see table below) the figures shows that there has clearly been low-cost growth in Morocco, with Royal Air Maroc losing 16% of its market share to the LCCs, despite the flag carrier increasing its capacity.
|
Carrier |
Weekly Seats |
Destinations from Morocco |
Market Share |
|
Royal Air Maroc |
77,886 |
54 |
71% |
|
Air France |
6,439 |
3 |
6% |
|
British Airways |
3,824 |
4 |
3% |
|
Iberia |
3,161 |
3 |
3% |
|
Regional Air Lines |
2,413 |
11 |
2% |
|
Others |
16,054 |
15% |
|
|
Total |
109,777 |
100% |
Source: Flightbase September 14-20, 2005
WHY IS RAM INTERESTED IN JET4YOU?
Royal Air Maroc (RAM) has been without a low-cost arm since it integrated its previous LCC subsidiary, Atlas Blue, in early 2010 which failed due to lack of brand presence, and was in many senses very similar product to Royal Air Maroc. This has left a gap, which Royal Air Maroc can easily fill through this latest takeover.Jet4you has a strong brand presence in Morocco and has a good standing in the important France to Morocco market. Jet4you will be used as a vehicle to combat the low cost carrier presence in Morocco.
Although it is owned by the TUI Group, the airline is less vertically integrated than other TUI carriers in Europe, such as Jetairfly (Belguim), Corsairfly (France) and Arkefly (The Netherlands), and is essentially a low-cost operator with seat alone sales accounting for much of its capacity.
Jet4You currently operates 78 weekly flights from Morocco to 12 European destinations, six of which are in France.
The Jet4you network to Europe is listed below;
|
Destination |
Weekly Flights |
|
Paris Orly |
25 |
|
Barcelona |
12 |
|
Brussels Charleroi |
7 |
|
Milan Malpensa |
6 |
|
Toulouse |
6 |
|
Bologna |
5 |
|
Lyon |
4 |
|
Bordeaux |
3 |
|
Venice |
3 |
|
Marseilles |
3 |
|
Geneva |
2 |
|
Nantes |
1 |
|
Total |
78 |
Source Flightbase September 14-20, 2010
THE MOROCCO TO FRANCE MARKET
France-Morocco is a key market for Royal Air Maroc. In the period April 09-10 nearly four million passengers flew between the two countries, with the flag carrier having 48% of the market. In comparison, in the same time period in 2006-07, Royal Air Maroc had a 63% share of this market.
Morocco is a growing leisure destination for French passengers and with strong VFR traffic, the low-cost operators have seized their opportunity to capture this traffic, with easyJet now having 12% of the Morocco to France traffic flows and Ryanair taking 6%.
THE LOW-COST BATTLE
Royal Air Maroc will look to deploy the Jet4you fleet on sectors where it can compete with the low-cost operators. Jet4you offers a one tier product and lower unit costs which will allow RAM to compete on price in what is a price sensitive market.
From its Casablanca hub, RAM now faces competition from either easyJet and Air Arabia Maroc on six sectors. The latter competes on Amsterdam, Barcelona and Bologna, while the UK LCC competes on Milan MXP and Madrid. Both compete with Royal Air Maroc on Lyon.
At RAM's Marrakech base, Ryanair competes on the Madrid and Marseilles sectors.
The takeover makes sense from a network perspective, with both Royal Air Maroc and Jet4you having their primary bases in Casablanca. There the flag carrier operates 63,525 weekly seats compared with 5,252 operated by Jet4you.The takeover will result in network rationalisation on certain routes as the carriers to compete on nine European markets from Casablanca and two from Marrakesh.
Jet4you is an established brand in Morocco and will aim to traffic passengers to Morocco as a holiday destination competing with the low cost sector. The challenge for Royal Air Maroc is whether the market is large enough for this new low cost subsidiary?
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