Budget carriers fly higher in Mideast

Sharjah: The Gulf Arab countries, shedding their traditional reputation for opulence, are the latest to join the phenomenon of no-frills budget airlines that have transformed air travel in Europe and America.

The three chief Middle East budget airlines - Air Arabia, Jazeera Airways and Atlas Blue - have already grabbed five per cent of the region's air travel market, and analysts say that portion is set to increase in coming years as booming Gulf economies attract more fliers.

Despite the Gulf's luxury-obsessed reputation, there is a healthy market for low-cost flights, said Habib Fekih, president of Airbus Middle East, a unit of the European aircraft manufacturer.

"Many people have this perception of the Gulf as being dedicated to anything first class, but this is not true," Fekih said.

"A big part of the population in this part of the world need low fares. They are either Asian labourers or Western expatriates whose number is increasing because of the region's booming economies," he added.

Like Europe's easyJet and Ryanair, and America's Southwest Airlines, budget carriers in the Middle East are connecting mid-sized cities that may otherwise have no direct links.

Common destinations include Egypt's central city of Assiut and coastal city of Sharm Al Shaikh, Almaty in Kazakhstan, Iran's holy city of Mashad, Syria's ancient cities of Aleppo and Damascus, Yerevan in Armenia, and small Indian cities such as Kochi and Nagpur.

Mideast budget airlines offer services similar to their US counterparts, from guaranteed seats and meals for purchase on board to free checked luggage up to 44 pounds.

Jazeera offers a 'Jazeera Plus' business-class equivalent. That's considerably less luxurious than carriers like Emirates, which fly global routes and are known for first-class service.

On shared destinations, budget airlines are far cheaper than full service airlines. Emirates charges $540 (415 euros) for a round-trip from Dubai to Thiruvananthapuram, India. The same trip from Sharjah on Air Arabia costs $266 (200 euros). A round trip ticket from Kuwait to Mumbai, India, costs $800 (610 euros) on Kuwait Airways and $240 (180 euros) on Jazeera.

Aviation experts say budget carriers' success stems from the easing of government restrictions on competition. Deregulation that has sparked competition in the Gulf still has a long way to go in some markets. Budget airlines are still banned from operating to Cairo, said Abdul Wahab Teffaha, secretary-general of the Arab Air Carriers Organisation, a Lebanon-based industry advocacy group.

"In the Arab world, liberalisation is a gradual move toward easing restrictions. We are heading in that direction, but I cannot say we are totally there yet," Teffaha said.

Sharjah-based Air Arabia, the oldest and largest of the Arab world's three budget airlines, saw its passenger numbers increase from 500,000 in 2004 to 1.8 million passengers last year, said Adel Ali, Air Arabia's chief executive.

The fast-growing airline has transformed Sharjah's once bucolic airport, ferrying passengers to 31 destinations, including faraway cities in Turkey, Kazakh-stan, Nepal and Sudan.

The company began operating in late 2003 with two aircraft and a $13 million (10 million euros) grant from the government of Sharjah.

Air Arabia now owns nine aircraft and plans to go public, selling 55 per cent of its shares this year, Ali said. The Sharjah government will retain 45 per cent ownership.

The airline expects to report 2006 profits significantly higher than the $8.8 million (6.8 million euros) it made in 2005, Ali said.

Air Arabia is not the only budget player plying busy routes in the Middle East.

Expansion

Kuwait-based Jazeera Airways, the only private airline in the Middle East, grew from two planes and five destinations in October 2005 to four aircraft flying to 12 destinations last year, said Marwan Boodai, Jazeera's chief executive. Jazeera carried about 500,000 passengers last year, he said.

A third budget carrier, Marrakech, Morocco-based Atlas Blue, established in 2004, caters to European tourists linking 15 European cities with Marrakech.

Low-cost carriers from outside are also breaking into the market. In 2005, Air India launched Air India Express, a no-frills operation connecting India to the Mideast. Air India Express started with 14 flights a week from India to Abu Dhabi, and has since expanded to 50 a week, said Dubai-based regional director F.J. Vaz.

In addition to the UAE, the Indian carrier connects Bahrain and two cities in Oman to several cities in India.

Saudi Arabia is in the process of granting traffic rights to two budget airlines, Sama and National Air Services.

Despite the flurry of activity, JP Morgan's Peter Negline said the Mideast budget air travel market is still in its infancy.

"They're in a position to stimulate a lot of traffic," said Negline, a Hong Kong-based airline analyst.

Budget airlines are hampered by their reliance on internet sales and credit cards, said Danvir Khawaja, managing director of Arabian Travels agency in Dubai.

"Budget airlines still make their best offers online but most people in this part of the world still prefer to deal with another human being," he said. "People are also less comfortable using their credit cards." But he expects people in time will become more comfortable dealing with budget airlines.