Malaysian budget airline AirAsia is planning to establish a Gulf hub this year, aiming to enhance connectivity between Europe and the region while strengthening air links between South-East Asia and the Gulf. According to founder and CEO Tony Fernandes, the airline has shortlisted four airports, including one in Ras Al Khaimah and another in Saudi Arabia.

In an interview with the Dubai Eye radio channel, Fernandes stated, “We are in discussion with four cities, to be absolutely fair and transparent … [but] I don’t want to make any comment right now on who we are talking to. But I can be very open that countries that are interested in us and [those] we are interested in … includes Saudi Arabia, [and] Ras Al Khaimah as well.” He emphasized that Dubai and Sharjah are not being considered for the hub, noting that Sharjah is well-served by Air Arabia and that Dubai’s large and complex airport environment would not be beneficial for AirAsia.

Fernandes explained, “Dubai wouldn’t really benefit from an AirAsia. It’s so successful already. But other Emirates, other places in the Gulf would benefit tremendously from the traffic we could bring both ways.” The airline has not yet responded to requests for comments from The National regarding the hub’s details.

This initiative comes as AirAsia is recovering from a bankruptcy-like restructuring following a significant financial crisis that led to massive losses during the Covid-19 pandemic. Reports indicate that Saudi Arabia’s Public Investment Fund (PIF) is preparing to invest approximately $100 million in the airline based in Kuala Lumpur. In May, AirAsia’s parent company, Capital A, announced plans for a significant expansion into Saudi Arabia, which includes new routes to Riyadh and Dammam, along with increased flight frequency to Jeddah from Kuala Lumpur.

Fernandes has held discussions with government officials from Gulf states during the recent Paris Air Show about establishing a regional hub. He remains undeterred by the ongoing regional tensions, including the recent conflict involving Israel, the US, and Iran, as reported by the Financial Times.

Saj Ahmad, chief analyst at StrategicAero Research, warned that AirAsia may face challenges in a market dominated by well-established, often state-backed airlines. He stated, “Stepping into the UAE would be immensely difficult. The compelling product and network advantage UAE airlines enjoy is insurmountable.” Ahmad suggested that while AirAsia could attract some customers from other airlines in the UAE, achieving long-term success would be difficult.

He also noted that Kuwait, Oman, or Bahrain might be better options for AirAsia due to fewer domestic airlines. Regarding Ras Al Khaimah, he mentioned that the emirate is emerging as a getaway location, enhanced by plans for a casino, but cautioned it might not significantly change its appeal to a broader audience.

When asked if a partnership or sovereign investment from the UAE or Saudi Arabia would be necessary for the new hub, Fernandes remarked that it was “not critical” but appreciated the idea. He explained, “But it’s nice to have … we have to treat these two things as independent.”

This will be AirAsia’s second attempt to create a hub in the Gulf, following the withdrawal of AirAsia X from Abu Dhabi in 2010 for operational issues. Two years later, the airline contemplated launching a low-cost carrier for the Gulf region. As of the end of the first quarter of this year, AirAsia’s fleet consists of 225 aircraft, and Fernandes mentioned that the airline is collaborating with Airbus to acquire long-range aircraft, including the Airbus 321 Long Range and the 321XLR, which would facilitate global connectivity.