Image: Air Arabia CEO
Kamran Jebreili  /  AP
Adel Ali, chief executive of Air Arabia, speaks at the airline's office in Sharjah, United Arab Emirates, during an interview last month. Gulf Arab countries have become the latest global stronghold for no-frills budget airlines that have transformed air travel in Europe and America.
updated 2/1/2007 4:23:14 PM ET 2007-02-01T21:23:14

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 Mideast budget airlines — Air Arabia, Jazeera Airways and Atlas Blue — have already grabbed 5 percent 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 laborers or Western expatriates whose number is increasing because of the region’s booming economies.”

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 el Sheik; Almaty in Kazakhstan; Iran’s holy city Mashhad; Syria’s ancient cities of Aleppo and Damascus; Yerevan, Armenia; and small cities in India, like Kochi and Nagpur.

Mideast budget airlines offer services similar to their U.S. 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 airlines charges $540 for a round-trip from Dubai to Thiruvananthapuram, India. The same trip from Sharjah on Air Arabia costs $266. A round trip ticket from Kuwait City to Mumbai, India, costs $800 on Kuwait Airways and $240 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 Organization, a Lebanon-based industry advocacy group.

“In the Arab world, liberalization 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, Kazakhstan, Nepal and Sudan.

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The company began operating in late 2003 with two aircraft and a $13 million grant from the government of Sharjah, a conservative emirate overshadowed by its freewheeling neighbor, Dubai.

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

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

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

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, the Emirates’ capital, and has since expanded to 50 a week, said Dubai-based regional director F.J. Vaz. In addition to the Emirates, 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.

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