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Air Arabia Income Surges 32pc on Passenger Increase

DUBAI — UAE-based low-cost carrier Air Arabia said its first quarter net profit went up by 32 per cent from a year earlier, thanks to passengers shifting to cheaper airlines amid the global recession.

Air Arabia said it earned Dh103 million in the first quarter compared to Dh78 million a year ago. Revenue during the quarter increased by 21 per cent to Dh383 million.

The airline said it served a total of 951,000 passengers in the first quarter, 26 per cent more compared to 757,000 passengers in the previous year. The average passenger seat load factor, or passengers carried as a proportion of all available seats — stood at 81 per cent for the first quarter.

“Globally, the aviation industry faced extraordinarily difficult market conditions in the first three months of this year, primarily due to the worldwide financial crisis and its direct impact on the travel habits of both business and leisure passengers,” said Adel Ali, Board Member and Group Chief Executive Officer of Air Arabia.

Despite the global economic slowdown, Ali said Air Arabia still expects to strengthen its position in the Middle East and North Africa (MENA) region.

Recently, the carrier officially launched Air Arabia Maroc, an Air Arabia joint venture company, which operates from the carrier’s second hub in Casablanca, Morocco. Air Arabia also recently introduced service to two new destinations – Goa, India, and Athens, Greece. This increased its network to 46 destinations across the Middle East, North Africa, Europe, South and Central Asia.

HSBC Holdings on May 7, initiated coverage of Air Arabia, assigning an “overweight” rating and a target price of Dh1.30. It cited the airline’s growth potential as penetration by low-cost carriers in the MENA region is still low at just 4.5 per cent, compared to 10 per cent in Asia, 23 per cent in the United States and 27 per cent in the European Union.

The global crisis is also opening a window with low-cost carriers historically outperforming conventional airlines during times of economic and social uncertainty, said HSBC.

“With 70 to 80 per cent of the estimated population in the UAE deemed to be expatriate, air travel tends to become a necessity. While economic growth and prosperity seem to be slower in 2009, we believe demand for carriers over the summer period within the region should have better prospects holding up, relative to global traffic, and particularly for low-cost carriers, as consumers look to trade down,” said David Lepper, head of UAE Research at HSBC Bank Middle East Ltd.

Lepper said that although the Middle East faces a challenging “demand environment,” established low-cost carriers are likely to benefit from cost-conscious consumers and “better regional metrics” relative to other parts of the world.

Shares of Air Arabia, which are listed at the Dubai Financial Market, ended 1.07 per cent higher at Dh0.94 last Thursday.

· rocel@khaleejtimes.com