Sharjah launched Air Arabia with a flight to Bahrain, billing itself as the first low-cost carrier in the Middle East. AFP
Sharjah launched Air Arabia with a flight to Bahrain, billing itself as the first low-cost carrier in the Middle East. AFP
Sharjah launched Air Arabia with a flight to Bahrain, billing itself as the first low-cost carrier in the Middle East. AFP
Sharjah launched Air Arabia with a flight to Bahrain, billing itself as the first low-cost carrier in the Middle East. AFP

Weekend

Timeframe: When Air Arabia launched its first flight to Bahrain

The Sharjah-based airline has operated for 20 years since its first flight in 2003

Faisal Salah
Faisal Salah

October 20, 2023

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Twenty years ago, the Middle East’s first budget airline, Air Arabia, launched. Its inaugural flight was from Sharjah – where it is based – to Bahrain.

The airline began operations with two Airbus A320s, which made trips to Bahrain, Kuwait, Lebanon, Oman and Syria.

Air Arabia was established on February 3, 2003 by an Amiri Decree issued by Sheikh Dr Sultan bin Muhammad Al Qasimi, Ruler of Sharjah.

The airline broke even in its first year of operations and went on to create many joint ventures throughout the region.

In the past two decades, Air Arabia has become known for its regional low-cost travel, introducing concepts new at the time, including a pay-as-you-go model for in-flight services.

The airline has also shown a commitment to environmental sustainability by investing in fuel-efficient aircraft and implementing eco-friendly practices to reduce its carbon footprint.

Now with a fleet of more than 60 aircraft, Air Arabia flies to 170 destinations with its shortest flights going to Gulf destinations such as Muscat and Manama, while some of its longest flights go to Milan, Italy and Kuala Lumpur, Malaysia.

Ground crew attend to an Air Arabia Airbus A320 at Kuwait International Airport in October 2003. AFP
Ground crew attend to an Air Arabia Airbus A320 at Kuwait International Airport in October 2003. AFP

Air Arabia has engaged in many joint ventures over the years, striking agreements in Armenia, Egypt, Jordan, Morocco and, most recently, Abu Dhabi.

Air Arabia Abu Dhabi launched on July 14, 2020 to serve low-cost travellers in the capital with support from Etihad Airways. Since then, the airline has flown to destinations in Egypt, India and Bangladesh, among other places.

Today, Air Arabia is a successful low-cost airline in the region, posting a profit in its latest projections.

Sheikh Abdullah bin Mohammad Al Thani, chairman of Air Arabia, said of the company’s financial results shared in August: “Air Arabia’s strong performance in the second quarter of this year is a testament to the resilience and effectiveness of the business model we operate.”

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Killing of Qassem Suleimani
KILLING OF QASSEM SULEIMANI

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: October 20, 2023, 6:01 PM
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