The Airlines Competing in What Could Be $200 Billion Islamic Travel Marketby
Malaysian carrier is world's fourth Shariah-compliant airline
Number of Muslims growing twice as fast as world population
Abdullah Al Mubarak says how well Rayani Air lives up to its pitch as Malaysia’s first Shariah-compliant airline will help decide whether he becomes a frequent flier.
“I heard the airline follows Islamic teachings like reciting a prayer before take-off,” said the 30-year-old teacher as he waited at the airport near Kuala Lumpur to board one of its flights back to his home in Kota Bharu. “The stewardesses are decently attired, which is good because I have a young son with me. If the service is good, I may switch to flying with them.”
Rayani Air had its maiden flight on Dec. 20, becoming the fourth carrier to follow Islamic tenets after Saudi Arabian Airlines, Royal Brunei Airlines and Iran Air. The airline, which doesn’t serve alcohol, offers halal food and requires Muslim female cabin crew to cover their heads, services five domestic destinations and has plans to fly overseas by 2017, said Managing Director Jaafar Zamhari. It may seek loans or bring other investors on board and would eventually like to list on the stock exchange, he said.
The company will compete for a portion of a Muslim $145 billion travel market that could expand to $200 billion by 2020, according to Singapore-based travel consultancy CrescentRating Pte Ltd. That provides opportunities for financiers, with Saudi Arabian Airlines considering an initial public offering, while carriers including Emirates and PT Garuda Indonesia have sold $12 billion of sukuk since 2008.
“Muslim travelers are indeed looking for services and experiences which take their needs into account,” said Fazal Bahardeen, chief executive officer at CrescentRating in Singapore. “There’s definitely growth potential for airlines” that prohibit alcohol, have halal food and provide prayer facilities, he said.
Rayani, which has its hub in the tourist resort of Langkawi, has leased two Boeing 737-400 planes and will add two 737-800 aircraft to its fleet by 2017, said Jaafar, a former official at Malaysia’s civil aviation agency. The carrier aims to fly to Manila, Jakarta, Phuket and Tiruchirappalli in southern India next year, he said. Passengers do not need to comply with a dress code and there’s no segregation of the genders.
The airline is majority-owned by Ravi Alagendrran and his wife Karthiyani Govindan who also control Terus Maju Metal, which has an iron ore mine and holds government contracts to salvage marine vessels. Rayani has paid-up capital of 5 million ringgit ($1.1 million) and wants to fly to Europe and take Muslim pilgrims to Saudi Arabia within 10 years, said Jaafar.
Non-Muslim countries are also tapping the Shariah-compliant travel market. Firnas Airways, a U.K.-based Shariah-compliant carrier founded by Bangladeshi businessman Kazi Shafiqur Rahman, plans to start operations this year and will fly to South Asia.
Islamic airlines face challenges that are the same as those confronting other carriers, according to Amanah Capital Group Ltd., a consultancy in Kuala Lumpur. Malaysia Airlines Bhd., whose fares are comparable to Rayani Air’s, cut 6,000 jobs in June and is trying to reduce costs by 20 percent in an attempt to return to profitability after two air disasters in 2014.
“The bigger challenge for Shariah-compliant airlines is to capture the non-Muslim market,” said Amanah Chief Executive Abas A. Jalil. “It’s just a matter of giving a good perception that Shariah-compliant airlines provide the same quality of services at a competitive price to everyone.”
A fast-growing, youthful and increasingly affluent Islamic population will boost the number of Muslim travelers by 39 percent to 150 million by 2020, according to a CrescentRating and MasterCard Inc. study. That’s spawning services including inflight prayer calculators and mobile-phone applications showing the location of mosques. The number of Muslims will rise 73 percent to 2.8 billion by 2050, more than twice the rate for the world’s population, the Pew Research Center forecast in a report last year.
“Muslims are now becoming an important consumer market for the entire world," according to the CrescentRating and MasterCard study. “Faith is increasingly influencing their purchasing decisions. Muslim travel will continue to be one of the fastest-growing travel sectors in the world.”