As the state-owned airline rebounds from a difficult period following the global economic downturn and expansion efforts at a number of Morocco?s airports continue, recently increased handling costs are beginning to challenge low-cost carriers growth and future operations in country.

Over the past 10 years, Morocco has pursued a highly ambitious programme of investment in transport through two strategic plans: one running from 2003 to 2007 and the other from 2008 through 2012. Some Dh120bn (?10.73bn) is being invested through the current plan, while approximately Dh58bn (?5.18bn) was spent during the previous period of investment.

Transport infrastructure has been the main beneficiary, with investments funding the expansion of several terminals at the country?s busiest airports. Casablanca?s Terminal 1 is currently undergoing a number of upgrades that are expected to cost around ?173m. Once completed, annual capacity is expected to reach 8m passengers. Additionally, a third terminal is being planned for Marrakech-Menara International Airport and a second terminal is to be opened at Fez-Sa?ss Airport.

Morocco?s transport investment programme has already seen extensions completed at airports in Oujda, Dakhla and Rabat. The new terminal at Rabat-Sal? Airport, for example, which opened in January 2012, cost approximately Dh280m (?25.38m). The airport can now handle 1.5m passengers annually, up from 500,000 in 2008. In June, Jetairfly, a Belgium-based airline, launched twice-weekly flights between the Moroccan capital and Brussels.

At present, Morocco has more than 45 airlines operating in the country. Thanks to liberalisation of the sector in 2004, the number of air connections has steadily increased, particularly after an open-skies agreement was signed with the EU in 2006. This move allowed both international and low-cost European airlines to compete in the market. Consequently, flight costs dropped following the arrival of several low-cost carriers, such as Air Arabia Maroc and Jet4you, while passenger numbers increased.

While the open-skies agreement has allowed low-cost operators to thrive, it has put a number of constraints on other airlines. Royal Air Maroc (RAM), the country?s main carrier, went through two years of turbulence due to surging fuel prices, increased competition and a decrease in demand as a result of the global economic downturn. Up until 2008, RAM had managed to face growing competition from low-cost airlines by transforming Casablanca into a regional transport centre through increased links to Europe, Africa, North America and the Middle East.

Following the closure of Atlas Blue, RAM?s low-cost carrier, in January 2010, and the discontinuation of several unprofitable connections through the remainder of that year and 2011, the state-owned company announced a restructuring plan that would help it overcome its financial struggles. The Moroccan government then provided RAM with Dh1.6bn (?145.03m) to help the company achieve this.

Since then, the airline has made remarkable progress. Under its plan to restructure the company, RAM has maintained its connections to neighbouring African countries and Europe, cut its workforce by 35% and reduced its fleet to 43 aircraft, from 53 in 2010. As a result, by June 2012, RAM had managed to exceed the 5.7% turnover target imposed by the government. In April 2012, RAM announced that it may seek a strategic partner to help further boost its business profitability.

While the Moroccan Airports Authority (L?Office National des A?roports, ONDA), which is responsible for the development and operation of the country?s airports, is looking to attract more international airlines to Morocco and increase airport capacity to 36m passengers in 2013, changes to handling charges have seen some airlines cut services to Morocco.

Ryanair, one of the main low-cost carriers flying to Morocco, plans to cut 34 weekly flights starting from October 2012 following a disagreement with ONDA regarding an increase in handling charges. The airline is projecting a loss of 250,000 passengers annually due to the cancelled flights. Easyjet has also announced plan to cancel flights from Madrid to Morocco.

The decision taken by Ryanair and Easyjet to reduce links to Morocco is expected to impact a number of sectors in the country, particularly if further low-cost airlines decide to cut flights or withdraw their services. This would not only have a negative impact on a city such as Marrakech, where half of the 232 flights carried out weekly are operated by low-cost airlines, but on the country as a whole.


Source: oxfordbusinessgroup

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