Abu Dhabi, UAEFriday 13 December 2019

Abraaj is version two of Lehman Brothers, says Air Arabia chief

Adel Ali is hopeful for a 'good year' in 2019

Air Arabia reported a loss in 2018 after impairments related to its exposure to Abraaj. Antonie Robertson / The National
Air Arabia reported a loss in 2018 after impairments related to its exposure to Abraaj. Antonie Robertson / The National

Air Arabia, which faced Dh1.13 billion in impairments from its exposure to Abraaj, compared the collapsed Dubai-based private equity firm to the bankrupt US investment bank Lehman Brothers in the wake of multiple Abraaj executives’ arrests.

Abraaj is “version two of the Lehman Brothers,” Adel Ali, chief executive of Sharjah-based budget airline Air Arabia, said on Tuesday. The airline reported a loss in 2018 after impairments related to its exposure to Abraaj.

Air Arabia posted its first full-year loss on record in 2018 after booking impairments as a result of its exposure to the now defunct private equity firm Abraaj. The collapsed company managed $14 billion at its peak and is currently undergoing a court-supervised restructuring. In June, Air Arabia disclosed exposure of $336 million to Abraaj through funds and short-term loans, making it one of the companies with the biggest exposure to the group.

“We decided as a company to impair the whole amount into one year and the reason we did that was it lets us take a one-year loss and move on,” Mr Ali said. “We need to grow our business, the potential and opportunities are there, so I decided to convince our board and shareholders at the AGM to take a full-amount impairment and let’s concentrate on our business.”

The airline said in January it had started legal proceedings against Abraaj founder, Arif Naqvi, by filing a misdemeanour case in a Sharjah court. The airline's legal move follows arbitration proceedings it undertook in July. Abraaj is trying to sell off parts of the business to repay its debt.

Mr Naqvi was arrested in the UK this month on US charges of allegedly misappropriating $230 million in fund money. The private equity company founder was arrested at Heathrow Airport by British police on behalf of the American authorities.

Mr Ali reiterated that the Abraaj-related investments had “absolutely no impact” on the airline’s strategy, growth or finances and is optimistic about the company’s prospects this year.

“We’re moving on and hopefully we’ll have a good year in 2019 and life would be back to normal,” he said.

The airline is bullish on growth in its hubs in Egypt and Morocco, where it is adding more planes.

“Morocco has been a star, we moved up to 10 airplanes into there and more to go,” he said. “It is doing financially well.”

Air Arabia flies more than 70 routes between six airports in Morocco to Europe.

Egypt “is back now” following disruptions in tourism from the 2011 protests that ousted former president Hosni Mubarak.

“Tourists are coming back from this part of the world and from Europe,” he said. “Our intention is to grow.”

The airline, which took delivery of one long-range narrow-body Airbus A321 LR in April, will start flights to the Malaysian capital Kuala Lumpur in July and is eyeing service to Bangkok once it receives more of the planes, he said.

Updated: April 30, 2019 08:10 PM