Air Arabia's first-quarter profit almost doubles

(PATRICK CASTILLO)

Air Arabia, the Middle East's largest low-cost carrier, said first-quarter profit almost doubled after it carried more passengers.

The carrier, based in Sharjah, United Arab Emirates, said net income in the three months to March 31 surged to 78 million dirhams ($21.24 million) from 43 million a year earlier.

Turnover rose 59 per cent to 383 million dirhams and the number of passengers rose to 757,000 from 577,000 in the year-ago period, it said in a statement.

Average load factor for the first three months of the year - the percentage of seats occupied on each flight - was 85 per cent compared with 83 per cent a year earlier.

"The quarter was good because of more passengers and seat factor, even with the challenges of continued inflation and high oil prices," Chief Executive Officer Adel Ali told Reuters by telephone.

Despite a challenging environment, its objective was to achieve similar profit growth this year to 2007, Ali said.

Profit last year jumped to 376 million dirhams from 101 million in 2006.

"High oil prices are a doubled-edged sword, in one way the economy is good because of high oil prices, which means more people travel and what is helping is higher fuel surcharge," said Ali, adding the high seat factor was the real driving force behind quarterly results.

Sharjah is a member of the UAE federation, the world's fifth largest oil exporter. Oil prices have risen more than six-fold in the last six years, spurring economies of the Gulf, the world's largest oil-exporting region.

That has attracted workers from around the world, especially South Asia, the Middle East and the Philippines.

PASSENGER OUTLOOK

The airline, whose shares have rallied more than 90 per cent since it listed on the Dubai Financial Market last July, will probably carry 30 per cent more passengers this year as it expands its fleet. It added two new Airbus A320 aircraft in March, taking its fleet to 13.

The company, which in November ordered $3.5 billion of aircraft from Airbus SAS, carried 2.7 million passengers last year, an increase of 53 per cent.

"We are in close discussions [for borrowing] with financial houses for our bulk purchase...when we're looking at just under $3 billion, we are eyeing all options," Ali said, adding the airline is considering Islamic and conventional bonds, or loans.

"We are looking at the latter part of this year to finalise."

The airline has added two new destinations in India in 2008 raising its total number of destinations to 39, and opened its new hub in Kathmandu, Nepal.

It signed a similar initial agreement last year to use the Moroccan city of Rabat as a hub for Africa and Europe.

It plans to open as many as six new routes in the remaining three quarters, Ali said.

In a Reuters survey in March, Cairo-based investment bank EFG-Hermes and Deutsche Bank forecast the company would post profit of 70 million dirhams and 92 million dirhams respectively, in the first quarter.

The stock closed 0.49 per cent lower on Sunday, before the results were released.

 

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