Air Arabia bullish about first-quarter performance, CEO says

Middle East low-cost airline Air Arabia has said its first-quarter performance, which is due to be released this week, is expected to be "good" as air travel continues its recovery from the Covid-19 pandemic.

The airline said it was "optimistic" about the financial outlook for 2022 as it anticipates air travel demand to remain strong this year and next, after two years' of dampened appetite during the pandemic, Adel Ali, group chief executive of Air Arabia, said at the Arabian Travel Market in Dubai on Tuesday.

"The business seems to be good and yields are on the right side," he said. "Fuel is a challenge always when there is a conflict ... a good oil price is good for the region because the economy is good and people will have more disposable income to travel."

With Covid-related travel restrictions easing worldwide, pent-up air travel demand is being unleashed, said the International Air Transport Association (Iata).

Total traffic in March 2022 (measured in revenue passenger kilometres or RPKs) was up 76 per cent on March 2021, the aviation trade body said in its monthly report.

Although that was lower than the 115.9 per cent rise in February's year-on-year demand, volumes in March were the closest to 2019 pre-pandemic levels, despite being 41 per cent below.

UAE-listed Air Arabia plans to start operations of its new joint-venture airlines in Pakistan and Armenia before the summer, Mr Ali said.

Air Arabia will place three leased Airbus A320 jets with Karachi-based Fly Jinnah to start with domestic flights initially, while Fly Arna will be leased two A320s to begin its first international route, he said in March.

Air Arabia Abu Dhabi, a low-cost joint venture with Etihad Airways, will increase capacity to operate 10 planes by the end of the year, up from the four Airbus narrowbodies it currently operates, Mr Ali said on Tuesday.

Air Arabia operates a network of bases spread across the Middle East, North Africa and Asia. The airline, with headquarters in Sharjah, has been pressing ahead with expansion as low-cost groups bet on a recovery in short-haul travel demand amid rapid Covid-19 vaccine campaigns around the world.

Air Arabia signed the joint-venture deals to establish new airlines in Abu Dhabi in 2020, and in Armenia and Pakistan in 2021.

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Arabian Travel Market 2022 - in pictures

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Staff costs will rise in 2022 but should stabilise by the end of the year, Mr Ali said, when asked about the labour shortages that the aviation industry is facing in parts of the world.

One challenge that airlines and airports around the world are tackling is staff shortages after an increase in travel demand, Iata said in April.

Passengers are experiencing flight restrictions or cancellations as airports and airlines struggle to bring back staff after a wave of layoffs during the pandemic.

Air Arabia had ordered 120 Airbus A320 family jets worth $14 billion in 2019 and has yet to select an engine maker to power the single-aisle planes.

The airline is holding talks with General Electric's CFM venture and Pratt & Whitney, the rival providers for the Airbus A320 Neo, for the engine order.

"To negotiate for such a size, you want the best deal, so it takes longer," Mr Ali told reporters. "It continues to be discussed."

The airline will take delivery of the planes in the last quarter of 2024 and is likely to make a decision on the engines within months, he said.

Asked about inflationary pressure on airlines, Mr Ali said the yield and pent-up demand is "good" and that the airline has no current plan to impose a fuel surcharge due to higher oil prices.

The airline is hedged above 50 per cent for fuel this year and next, he said.

Fuel bills typically comprise about 25 per cent of an airline's total costs, posing an additional challenge amid a rallying oil price.

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