As Abu Dhabi sets up national carrier, region's governments are encouraged to surrender control of state-owned airlines

Middle Eastern governments are being encouraged to relinquish control of their state-owned carriers and allow foreign investment as the Emirate of Abu Dhabi - a shareholder in Gulf Air - launches its own national airline.

"Airlines need the freedom to merge, acquire and go to the international financial market," Giovanni Bisignani, secretary general of the International Air Transport Association, told the Arab Air Carriers' Organisation (AACO) annual general meeting in Muscat, Oman last week.

James Hogan, chief executive of Gulf Air, which is owned by the governments of Abu Dhabi, Bahrain and Oman, added that "consolidation is inevitable in the Middle Eastern industry".

But Arab financial markets are not ready to invest in the region's airline industry, according to some. AACO secretary general Abdul Wahab Teffaha says that "governments are increasingly inclined towards privatisation, but Arab investors do not really go into large investments outside banking and real estate".

Arab Civil Aviation Commission secretary general Abdul Jaboot al-Dawdy added: "No Arab investors are ready to invest in airlines."

Meanwhile, Abu Dhabi has set up its own national carrier - Etihad (United) Airways - which is 100% owned by the government. Chief executive of the airline is Seif Al Mugheiry, who is chairman and chief executive of Abu Dhabi maintenance company GAMCO.

Etihad will launch services in late November to Egypt, Lebanon, Pakistan and the Indian subcontinent, with two Airbus A330-200s leased from Brazilian carrier TAM. Four A330s will be added next year, when long-haul services could begin.

Some observers expect the emergence of the airline will cause problems for Gulf Air, as it could take over Abu Dhabi's route rights, as Qatar Airways did when that country was still a Gulf Air shareholder.

Hogan dismisses speculation that Etihad's arrival could reduce Gulf Air's role to that of purely Bahrain's national carrier: "We'll have a similar relationship to the one we have with [partly state-owned] Oman Air." Although both carriers operate from Muscat, Hogan says they are not direct competitors as there is little route overlap.

Source: Flight International