By Mohammed Mukhashaf
ADEN (Reuters) - Yemen's Houthi fighters and their allies seized a central Aden district on Thursday, residents said, striking a heavy blow to the Saudi-led coalition which has waged a week of air strikes to try to stem advances by the Iran-allied Shi'ite group.
The southern port city has been the last major holdout of fighters loyal to the Saudi-backed President Abd-Rabbu Mansour Hadi, who fled Aden a week ago and has watched from Riyadh as the vestiges of his authority have crumbled.
The Houthis, who took control of the capital Sanaa six months ago in alliance with supporters of former president Ali Abdullah Saleh, have weathered eight days of air strikes by a Saudi-led regional coalition which aims to return Hadi to power.
Residents of Aden's central Crater district said Houthi fighters and their allies were in control of the neighborhood by midday on Thursday, deploying tanks and foot patrols through its otherwise empty streets after heavy fighting in the morning.
It was the first time fighting on the ground had reached so deeply into central Aden.
"People are afraid and terrified by the bombardment," one resident, Farouq Abdu, told Reuters by telephone from Crater. "No one is on the streets - it's like a curfew".
Residents said the Houthi fighters had not yet advanced into two remaining central Aden neighborhoods, including the military port, from Crater, which is home to the local branch of Yemen's central bank and many commercial businesses.
After a wave of air strikes by the Saudi-led coalition early on Thursday, residents said there was a lull in the air campaign, possibly because the Houthi forces were dispersed among residential buildings, making them hard to target.
A Houthi spokesman said late on Wednesday that the fighting in Aden showed that Saudi Arabia's military intervention had failed. "The victories in Aden today embarrass this campaign and silenced the aggressor states," Mohammad Abdulsalam told the group's al-Maseera television.
The foreign minister in Hadi's rump government, Reyad Yassin Abdulla, appealed on Wednesday for more effective international action to halt the Houthis before they took over Aden entirely.
AL QAEDA JAILBREAK
The war on the Houthis is just one of multiple conflicts being fought out in Yemen, the Arabian Peninsula's poorest country, which has grappled with a southern secessionist movement, tribal unrest and a powerful regional wing of al Qaeda in the east and center of the country.
The fighting has forced Washington to evacuate U.S. personnel from the country, one of the main battlefields in the secret American drone war against al Qaeda.
Huge street demonstrations in 2011 linked to wider Arab uprisings forced veteran leader Saleh to step down, but he has re-emerged as an influential force by allying himself with the Houthis, his former enemies.
The Houthis are drawn from a Zaidi Shi'ite minority that ruled a thousand-year kingdom in northern Yemen until 1962. Saleh himself is a member of the sect but fought to crush the Houthis as president.
In the Arabian Sea port of Mukalla, 500 km (300 miles) east of Aden, suspected al Qaeda fighters stormed the central prison and freed 150 prisoners, some of them al Qaeda detainees, sources in the local police and administration said.
They named one of the escapees as Khaled Batarfi, a prominent figure in Al Qaeda in the Arabian Peninsula, the powerful regional wing of the global militant jihadist movement. Batarfi was a provincial al Qaeda leader who was arrested in Yemen four years ago, security sources said.
Soldiers loyal to Hadi clashed with the suspected al Qaeda fighters in Mukalla early on Thursday, residents said.
In Dhalea, 100 km (60 miles) north of Aden, where militia fighters from the south have battled Houthis for several days, residents said the militia were in control of the town but Houthis were sniping from rooftops.
Residents also reported air strikes overnight on the coastal town of Shaqra, which is under Houthi control and lies on the coast between Aden and Mukalla.
(Additional reporting by Mohammed Ghobari in Cairo and Amena Bakr in Dubai; Writing by Dominic Evans, Editing by ...... ..........)