Air Arabia buys 49% stake in Petra Airlines in bid for Amman hub

Analysts said the acquisition would help Air Arabia to expand its strategic network. Pawan Singh / The National

Air Arabia has bought a 49 per cent stake in Jordan’s Petra Airlines as the group plans to develop a new hub in Amman that gives it access to the European low-cost travel market.

Petra Airlines will be rebranded as Air Arabia Jordan during the first quarter of this year, the Dubai-listed Air Arabia said yesterday.

Amman’s Queen Alia International Airport will become the low-cost carrier’s fifth global hub — to add to its existing Sharjah, Casablanca, Alexandria and Ras Al Khaimah operations.

Petra Airlines’ main shareholder, Jordan-based transport and tourism company Rum Group, will retain a 51 per cent stake in the airline.

Air Arabia said that two Airbus A320 aircraft will initially be based in Amman, providing direct services to "destinations across Europe, the Middle East and North Africa". Details of the new routes will be announced over the coming weeks.

“The establishment of a new hub in Jordan extends Air Arabia’s operational footprint into the heart of the Levant and brings us a step closer to achieving our stated goal of connecting the entire Arab world,” said Sheikh Abdullah Bin Mohammad Al Thani, chairman of Air Arabia.

He added the deal would “enable Air Arabia Jordan to reach its full potential in a shorter time span”.

The tumbling price of oil represents a major windfall for airlines worldwide with aviation fuel accounting for more than a quarter of industry costs. The International Air Travel Association (Iata) last month predicted that airline profits would surge by more than $5 billion to $25bn this year. Airlines were expected to post profits of $19.9bn for 2014, Iata estimates.

Analysts said the acquisition, for an undisclosed sum, would help Air Arabia to expand its strategic network.

“Air Arabia appears to be buying Petra for its existing licence. Launching new airlines is costly, timely and ultimately uncertain,” said Will Horton, a senior analyst at the Centre for Aviation.

“With Petra still being very small, it will not be as hard to restructure the airline and adopt a low-cost carrier model than if Air Arabia was acquiring a much larger carrier. The question for Air Arabia Jordan is how much it will be allowed to grow.”

The deal also opens up the lucrative European travel market for Air Arabia and takes the carrier closer to a region dominated by the pioneers of low- cost travel on the continent including easyJet and Ryanair, Europe’s largest low-cost carrier. Ryanair said yesterday that 6 million people flew with the airline in December, a 20 per cent increase on a year earlier. That helped the airline’s stock hit an all-time high.

Mohammad Kamal, an executive director at Arqaam Capital, said: “Air Arabia appears to be looking to the long term strategic benefits of establishing an operation in Jordan. With its attractive geographic location midway between the UAE and Mediterranean Europe, Air Arabia Jordan can gain access to European travellers wishing to vacation in the Red Sea.

“However, just as when it established hubs in Egypt and Morocco, Air Arabia has bought the right to operate from these locations — something which can be scaled up or down depending on economic or political circumstances within the catchment area of a particular hub.”

Air Arabia started flying from Sharjah in October 2003. Today, the carrier provides services to 100 destinations in Europe, the Middle East, Africa and Asia.

In November Air Arabia reported a 22 per cent increase in third-quarter profits to Dh247.4 million on the back of higher passengers numbers.

It carried more than 1.7 million passengers over the quarter, an increase of 15 per cent.

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