A new budget airline formed by Egyptian Travco Group and the UAE's Air Arabia hopes to begin operating by the end of 2009 from as many as five Egyptian airports, the head of Travco said.

The airline, Air Arabia Egypt, will seek Egyptian government permission to use airports at Cairo, Alexandria, Luxor, Hurghada and Sharm el-Sheikh to fly to European, Middle Eastern and north African destinations.

"We intend to submit our plan in the next weeks, and depending on the approvals we get we will decide on the operation and conditions of operation," chairman and chief executive Hamed El Chiaty told Reuters in an interview.

Travco, Egypt's biggest tourism company, owns 50 percent of the airline, Air Arabia 40 percent and an independent Egyptian investor 10 percent, Chiaty said.

Its initial capital is $20 million, increasing to $50 million over the next three years. The airline will lease aircraft from Air Arabia or other sources, Chiaty said.

"We have entrusted the day-to-day running of the airline to Air Arabia," said Chiaty. "We have a joint board, and we take the main decisions in the board, but they are in charge of the day-to-day running maintenance, engineering, catering and handling."

For its part, Travco will provide the airline with access to its network of tour operators and help in marketing. "We're going to help them with governmental relations and all that is related to dealings with the Egyptian government," Chiaty said.

The aviation sector was hit badly in 2008, first from rising fuel costs and then from the global financial crisis. Low-cost carriers typically perform better in an economic downturn than full-service rivals, by competing on price.

The new airline will enable Air Arabia,the Arab world's largest listed airline by market value, to open its third hub and diversify away from increased pressure in its home market.

Air Arabia currently operates a hub from its base at Sharjah and another from Casablanca in Morocco that opened this year.

Formed in 2003, it has a fleet of 20 Airbus A320 aircraft and has placed an order for 44 more A320s.

Travco says it operates 146 hotels, resorts and cruise ships and handles more than 1.3 million tourists annually. The company acquired Germany's Steigenberger Hotels in late August. - Reuters