Morocco sees opportunities for Major airlines expansion

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After a comparatively quiet couple of years in visitor arrivals due to the slowdown in the Eurozone, confidence in Morocco?s tourism sector is on the rise as airlines plan for what is expected to be an increase in demand over the short to medium term.

In June, Royal Air Maroc announced that it would purchase 20 to 30 new aircraft by 2020, including five long-haul jets. The state-owned carrier also said it was adding routes to Nairobi and Sao Paulo, set to start by December, part of a larger strategy to increase tourism and trade by developing links to new markets.

Other airlines have revealed plans suggesting they foresee continued growth in visitors to the North African kingdom. For the second time in less than a year, British Airways will increase the number of flights between Marrakech and London, from seven to ten a week during the winter. Ryanair, after cancelling 34 weekly flights to Morocco in 2012 following a row with the Moroccan airport authority over fees, has renewed its long-term interest by adding two bases in Fez and Marrakech, bringing the total number of airports it serves to eight.

Following the liberalisation of the airline sector in 2006, when Morocco signed an open skies agreement with the EU, the country is now served by nearly 50 airlines. Among these are 18 low-cost carriers that account for 35% of flights, dominated by Ryanair and Jetairfly. Royal Air Maroc?s market share has steadily declined in the face of the new competitors, from 62% in 2003 to less than 50% today. Nonetheless, the airline had its strongest financial results in over two decades in 2012, with an operating profit of Dh718m (?64.8m), following a period of significant restructuring in 2011. This solid performance came in the midst of a challenging year, as total commercial air passengers in Morocco declined by 3.6%, hitting 15,104,662.

Despite the intensifying competition, the market is far from saturated and opportunities remain, particularly in areas that have not attracted low-cost carriers. Driss Benhima, chairman and CEO of Royal Air Maroc, noted recently to local media that while the number of budget airlines serving Morocco has increased by 25% this year, there are major tourist destinations with little to no air service, such as Ouarzazate, Errachidia, Laayoune, Dakhla and Essaouira, which should provide opportunities for growth.

The increasing bullishness of the airlines comes amid more positive headline figures in demand, which appears to be rebounding from the hangover effects of the euro crisis and the Arab Spring the country suffered last year. In the most recent available statistics, from April 2013, commercial air passengers increased by 3.55% over the same month last year. Importantly, passengers from Europe, which account for three-quarters of air traffic, increased by more than 7% in April, matched by a rise in international passengers overall, although domestic passengers declined by 8.76%.

Although roughly 45% of the passengers arriving at Mohammed V International Airport in Casablanca, Morocco?s busiest airport connect to other flights without staying in the country, the increase in international air traffic has also been mirrored by an improvement in tourism figures. In the first five months of the year, the number of overnight stays in the main tourist centres of Marrakech and Agadir grew by 11% and 12% respectively, compared to the same period a year ago. The occupancy rate across Morocco through the end of May also rose by 3% over 2012, as did non-resident tourism revenues, to Dh21.2bn (?1.91bn).

Importantly for the airlines, the number of arrivals from European countries increased, up 7% for Germany, 10% for the UK and 8% for Italy, over the same five-month period. Travelers from France and Spain, the two largest source markets, have also stabilised compared to 2012.

While the economic challenges in Europe will likely remain an obstacle to growth, and undoubtedly helped account for the decline in air passengers in 2012, continued instability in other North African and Middle East markets may mean a rise in travellers to Morocco. Moreover, continued investment by airlines suggests that the tourism market is poised for growth in the medium and long term.

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