x Abu Dhabi, UAEMonday 24 July 2017

Sharjah-carrier rewards shareholders again

What's up For the second year in a row Air Arabia will give shareholders a 10 per cent dividend, the announcement of which sent shares climbing higher yesterday.

Sharjah // Air Arabia has once again decided to be generous. For the second year in a row the low-cost carrier will give shareholders a 10 per cent dividend, the announcement of which sent shares climbing higher yesterday. The stock, which closed at Dh0.98, making it the second-best performing stock on the Dubai Financial Market compared with last year, with its advance for the period of 5 per cent, trailing only Aramex's annual gain of about 8 per cent. Dividends have a nice way of smoothing out the bumpy ride investors have had of late and John D Rockefeller, the American industrialist, may have said it best when he opined: "Do you know the only thing that gives me pleasure? It's to see my dividends coming in." In these volatile times, such a return is more than just good - it can even be called outstanding. And it is a good bet the airline will grow further this year. Its stock has suffered from the general market malaise and is down 54 per cent from its high of two years ago at Dh2.15 a share.

So there is a lot of upside. Its plans to add a hub, its third, in Egypt are well on track, said Ali Khan, the executive director of Arqaam Capital in Dubai. "Their expansion strategy is in place and they have done a pretty good job with managing their fleet." Beginning in 2007, Air Arabia has been executing a plan to replicate its success at Sharjah International Airport, where its main operations are based, and open hubs in other countries. It already runs Air Arabia Maroc out of Casablanca and expects to open its Egypt operations in Alexandria late next month or early in April.

The company's expansion plans carry some risk: Air Arabia failed in its attempt to establish a hub in Nepal, shutting it down in July 2008 after six months of operation, largely due to problems with its local partner, Yeti Airlines. Despite the hiccup, investors have remained confident in the stock. Air Arabia delivered a record Dh510 million in profits for that year. igale@thenational.ae