Dubai: Southeast Asian budget carrier AirAsia is looking to set up a budget carrier in the Middle East and is in talks with a number of parties for the same, according to the top airline executive.
Tony Fernandes, Air-Asia's founder and group CEO, said that there was a "good opportunity for the low-cost carrier to serve the GCC region" as the dominant airlines in the Middle East were mostly full-service carriers, as quoted by Malaysian financial and investment weekly The Edge.
"Two or three parties have made known their interest. It's interesting, but the talks are very preliminary," Fernandes reportedly said, without divulging which parties the airline was in talks with, adding that AirAsia is "investigating (the prospects) quite seriously".
Malaysia-based AirAsia wanted to have a hub in the Middle East as a part of the company's 10-year strategy to expand into new emerging markets, according to Fernandes, who was in Doha to launch Tune Middle East, the hotels business of Tune Group, Fernandes' private investment group, according to The Edge report.
Asked which markets AirAsia might consider for its Middle East venture, Peter Morris, chief economist at UK-based aviation consultancy Ascend, told Gulf News: "Although the Middle East is a growth area, it is difficult to see AirAsia easily getting a significant foothold in Abu Dhabi, Dubai and Doha markets for reasons of intense competition by well-established airlines and budget competitors."
Domination
The budget aviation segment in the region is currently dominated by Sharjah-based Air Arabia and Dubai's flydubai. AirAsia currently flies to Iran and has plans to begin services to Jeddah in Saudi Arabia. "It is difficult to say there's room for more budget carriers in the region," said Andrew Charlton, managing director of the Europe-based strategic advisory, government and public affairs firm Aviation Advocacy.
"A new low-cost carrier tends to gain market and keep profitability when it is coming to compete with a limited number of high cost legacy airlines — that would not be the case in those markets," added Morris. "However, hub market opportunities do exist in the region, but with some big regulatory hurdles. Possible ones include Saudi Arabia, Iran and some North African countries. But these will not be easy or quick."
According to the two analysts, AirAsia's model has got more chances of working in "medium-haul markets" such as Iran or Jordan, as Charlton says. "Some markets such as Jordan are more open, but do not have big populations to support a new venture," Morris said.
He also warned that AirAsia will have a real "challenge to create a low cost base" and "critical mass" quickly given the level of existing regional competition.
"My view is ‘never say never', but AirAsia will not find it as easy away from their home region as they did in Southeast Asia," Morris said.
