Will Arkia go low-cost?

Last week, Arkia announced new activities: short-haul flights, rapid turnaround at airports, and use of secondary airports.

Arkia Airlines Ltd. is considering a $120 million investment to buy or lease four 70-100 seat jets with a range of 2,000 miles for flights to Cyprus and other regional destinations. The airline is examining CRJ 700 and CRJ 900 jets building by Canadas Bombardier Inc. (TSX:BBD) and Embraer 170 and 175, built by Brazils Embraer-Empresa Brasileira De Aeronutica SA (NYSE:ERJ; Bovespa:EMBR3). Arkia initially plans to buy or lease two planes, followed by two more at a later date.

These planes use short runways, which means that they can operate out of Tel Avivs Sde Dov Airport. Arkia is planning several flights per day, including to Cyprus, where it began to fly at the beginning of March.

There are indications that Arkia is planning on becoming Israels first low-cost airline, although controlling shareholder Avi Nakash prefers to call it regional operations.

Last week, Arkia announced new activity, which sounds a lot like low-cost flights: short-haul flights, rapid turnaround at airports, use of secondary airports, and minimal services. Arkia meets three of the four features of low-cost airlines.

The airline will operate out of Sde Dov, which will enable rapid security checks, so that passengers will be able to arrive at the airport only an hour before take-off. In addition, planes will only have to spend a brief time on the ground, which will increase operation use. Sde Dovs landing and take-off fees are also a fraction of those at Ben Gurion Airport, which will give Arkia greater profit margins.

Arkia also plans to ask the Ministry of Transport for designated carrier status on several routes for the new planes. In contrast to charter status, designated carrier status is a clear definition of low-cost airlines, which fly scheduled flights.

The only open question remaining is flight service. Arkia has not yet said whether the new flights will have full service, including designated seats, free food and beverages, movies and newspapers.

Published by Globes [online], Israel business news - www.globes.co.il - on March 11, 2007

Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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