Stelios Haji-Ioannou on low-cost Mideast airlines

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.

Notoriously, Olympic Airways, the big flag carrier, flies to Australia simply because there are so many Greeks down there. But that's not economically viable. It's just done because it's the flag carrier and it's a matter of national pride. What you have to do is to take one region and say, I'm going to link as many cities in that region as I can.

Q. Low-cost carriers, including Ryanair, have been hit hard in the past few months. How does the future look?

A. The Ryanair business model, which has been extremely profitable, has always had that risk of being exposed to challenge by the European Commission as to whether what they receive from local airports is a state subsidy or not. That was a risk they took, and good luck to them.

EasyJet has always been a lot more conservative. From day one, I chose main airports. So we flew to the main airport in Glasgow rather than Prestwick, which is an airport in the middle of nowhere.

One could argue as to which solution was more profitable, but at least we're not suffering from accusations of state subsidy. So that's the Ryanair issue. The stock price suffered a little bit, and now it's back up again. So the stock market says it's not going to be a long-term problem.

Q. Why aren't there local carriers in each European country?

A. We have to get away from national champions. In the same way that you don't necessarily ask which country produces the goods and services you consume, why should you insist on one airline per country?

I think it's archaic. It's like any other market: whoever is the strongest and has the most efficient business model will survive. You don't necessarily reject Dell computers because their headquarters are in Texas. You buy whichever computer you buy because it's the best for your needs.

Q. As one of the biggest shareholders in easyJet, are you happy with its performance?

A. I think last year was an exceptional year, especially with the war in Iraq. I believe the performance this year will be much better and more reflective of the potential of the company.

The stock market has begun to believe the same, and that's why the stock price has gone from a low point of about 160 [pence] to about 370 today. If you look at the stock prices of travel companies in anything from hotels to cruise lines, it's all looking up.

You will see the easy brand, in the next five years, in a dozen different sectors, rather than trying to dominate a particular sector. I almost look at myself as the brand's license holder rather than someone who is involved specifically in car rental or whatever else.

There are things that I'm working on at the moment that are brand-new that I haven't started yet. There's the concept of inter-city buses, easyBus, a hotel, called easyHotel, a budget hotel for low-cost accommodation. Then, you load the whole thing on a ship: I'm going to call it easyCruise.

Q. Won't being in too many places at once weaken the brand?

A. You're only as good as your execution, in the sense that you can make mistakes, provided you find ways of recovering from whatever situation you're in. The brand becomes stronger if it's applied carefully and with certain criteria in more areas.

When I start my hotel, I will rely, in the beginning, on people who have had a good experience with the airline and now are thinking of trying easyHotel. It cross-fertilizes and feeds itself.

Q. What's next for the group?

A. The buses will start in the next few months, and probably the hotels by the summer.

Q. Has everything worked as well as expected?

A. Every startup loses money in the beginning. Anybody who says that they can start a company and make money in a few months - they're dreaming. I think the companies are following a normal pattern of investment at the beginning, drawing heavy losses, then smaller losses, then break-even and then go.

I believe that my Internet company, which is my third, will break even this year. That's less than five years from launch.

Q. But an Internet café is a concept that is soon going to be obsolete.

A. People used to say that, but I can't believe that everybody in the world, even in developed countries, will walk around with a BlackBerry. I carry a BlackBerry, and pay dearly for it, and I use it because I can afford it.

Just go to New York or London, walk into any of our points of purchase - now they're not in premises that we control. They're inside restaurants.

What we've done is we've partnered people like McDonald's and Burger King, and installed our computers inside their premises. What happens is that people come for the Internet and eat, or eat and then use the Internet.

Q. But those chains are also offering WiFi.

A. How many people go to McDonald's with a laptop? Everybody in this building has been offered a free iPaq and probably has a laptop and everything else. Go and have a look at the cybercafé, which is on the other floor. You have to queue for a computer. People need it.

Q. As a matter of fact, I saw you queuing for a computer here in Davos.

A. I sat down and used it for an hour because my BlackBerry isn't working. Anyway, we shall see about that. I try not to be dogmatic. Maybe it will become obsolete, but not in the immediate future.