Stelios Haji-Ioannou on low-cost Mideast airlines (page 1 of 3)

Q. Several low-cost airlines have been launched in the Middle East in the last few months. Do you think the low-cost business model will prove sustainable in the region?

A. The low-cost airline business model was actually invented in the early 1970s in the United States. Everybody used to say it only works in Texas, but it clearly works in other parts of the world, not least in the United States and Europe.

Of course, there are several issues that make it more or less difficult to implement. Obviously, the first thing you need is an open, deregulated market.

It's so much more difficult for a startup to actually survive if they have to do battle with a state monopoly that basically owns the airport and owns the air traffic control system. It's a bit like trying to play football when the other team owns the referee and the pitch.

It doesn't mean it won't happen: the economic benefit is so great that I think it's unstoppable as a business model. It's the only way to fly short haul.

The other airlines will continue to carry people over long distances. People, especially on business, will continue to fly business class on long flights. But on short flights, there's no other way to do it.

Within the Middle East, I've sensed that something is going to happen. I get unsolicited requests for consultancy and assistance in investment and everything else.

In my agreement with easyJet, though, I have a non-compete clause. So while I'm easyJet's largest shareholder and the owner of the easy brand, I cannot start another airline.

But I think there will be people willing to make it happen in the Middle East. I don't know which of the countries will be the first to actually open up their skies, which is where the airline will flourish.

If you look at Europe, it's not a coincidence that Britain and Ireland actually gave birth to the two most successful low-cost airlines. It had to be a Greek who came to Britain to do it, but it doesn't matter. The point is I chose Britain to base my airline.

Q. Why exactly did you chose Britain?

A. Because it's more open. Margaret Thatcher sold British Airways, privatized the British Airports Authority, deregulated the market and said it's free for all, while the Greek government still owns Olympic Airways and doesn't essentially welcome competition.

Q. But what's the logic of a low-cost airline in the Middle East, which is highly regulated?

A. It is difficult. The pace of change will depend on the willingness of governments to actually deregulate.

It's a bit of a chicken and egg situation, because there is no incentive to deregulate unless you consider tangible benefits. Unless you begin to get people flying for next to nothing, why should you start cheering for deregulation that the government has no incentive to actually give?

Q. Travel within the Gulf region is limited. Will that impact low-cost airlines?

A. The limits have not been tested yet. JetBlue, a low-cost American airline, will now fly you non-stop from New York to Los Angeles - that's pushing six hours. Essentially it's not so different from the Middle East to the Indian subcontinent. Some parts of Europe, too, are within that range from the Middle East.

So I think it's a question of saying, I will stick to whatever range my aircraft can actually fly to, rather than saying, I'm based in a particular city and I have to fly to London and New York because they are the world's greatest cities, which is how the flag carriers started.