Bottom line hurt by travel downturn and more expensive fuel
Air Arabia reports 51% fall in profit
Net profit at Air Arabia fell by 51 per cent in the first quarter due to lower ticket prices and higher fuel costs, the carrier said. The Sharjah-based airline made a profit of Dh50 million (US$13.62m), compared with Dh103m in the first quarter last year before the arrival of flydubai, which has quickly expanded its service to 18 low-cost flights from Dubai International Airport.
"We are glad with the positive results Air Arabia posted in the first quarter of this year," said Adel Ali, the group chief executive of Air Arabia, which includes a budget operation based in Morocco. It also plans to launch an airline based in Egypt. "The lingering impact of the global financial crisis and the rise in fuel cost continues to affect the profitability of airlines worldwide as a result of continuous dilution in yields versus market overcapacity," Mr Ali said.
"Nevertheless, Air Arabia posted appealing profits for this quarter and maintained its positive growth in passenger numbers." The airline served 1.03 million passengers in the first quarter compared with 951,000 passengers carried in the same period last year. Its aircraft occupancy levels averaged 80 per cent, in line with last year. Kareem Murad, a transport analyst at Shuaa Capital in Dubai, said the results were below Shuaa's expectations of a Dh66m profit.
The impact of new competition from flydubai was not significant, Mr Murad said, because Air Arabia was still many times larger than the upstart budget carrier from Dubai. Air Arabia operates 21 Airbus A320 aircraft and serves 60 destinations. "It is not competition from flydubai but the aviation business in general, with the industry seeing very tight yields," he said. The global airline industry as a whole is expected to lose several billion dollars this year, he said, "so a profitable result is definitely positive for them".
The carrier's newest venture, Air Arabia Egypt, was originally expected to be launched in late March from Alexandria. That venture will be undertaken with the Travco Group. A revised launch date has not been given. The new unit "could become very profitable to Air Arabia's bottom line", Mr Murad said. email@example.com