Air Arabia profits soared in the first quarter of the year, even with the price of oil at historically high levels.
As oil prices enter a tailspin this week, Air Arabia might be able to repeat the same trick, analysts said.
The airline reported on Sunday that it generated quarterly net profits of Dh47.6 million, an increase of 11.6 per cent compared with the same period a year earlier.
Revenues rose by 21.1 per cent during the same period to Dh621.9m. With the company's earnings beating market estimates, Air Arabia's shares increased 1.8 per cent to 60.3 fils each in trading yesterday, compared with a rise of 0.2 per cent on the wider Dubai Financial Market General Index to 1,564.15.
Oil prices have fallen during six of the past seven trading sessions, with Brent crude futures falling 25 cents yesterday to $112.93 per barrel.
During the first quarter, the European benchmark averaged $118.45 per barrel.
Crude slumped as a result of weaker than expected employment data from the United States, and has been depressed further by recurrent market anxieties over Europe, following elections in France and Greece that have punished pro-austerity parties.
However, the benefits to Air Arabia would only be sustained if oil remains at lower prices.
"There has to be a sustained trend, not just a day-to-day movement," said Samir Murad,an analyst at NBK Capital. "If that happens and the easing in the oil price continues, that'll be a positive."
Air Arabia benefited from higher numbers of travellers but also appears to have successfully hedged the increase in fuel costs.
The airline had previously been struggling with high oil prices, which it had been unable to pass on to its customers, Mr Murad added.
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