Air Arabia, the largest of the Gulf's budget airlines, is flying high with strong passenger numbers and solid plans for growth.
This week the carrier rewarded investors with a dividend distribution of 4.5 per cent of capital, equivalent to 4.5 fils per share. It is looking like a good deal for investors.
The airline, based in Sharjah, has several factors in its favour. Most important is its steady flow of customers.
The number of passengers it carried as a percentage of available seats stood at a resilient 82 per cent last year.
High traveller numbers have led to strong sales. Revenue rose to Dh2.4 billion last year, up from Dh2.09bn a year earlier, an increase of 14 per cent. In the fourth quarter this increase translated into a profit of Dh78.7 million, 7 per cent higher than for the same period in 2010.
As well as maintaining its customer levels, Air Arabia is shrewdly managing its costs. It has about 17 per cent of its oil consumption this year hedged at about US$90 a barrel, while Brent is trading at about $125.
Air Arabia is demonstrating that it plans to build on the strong foundations it has built by continuing its expansion.
The carrier spent $162.7m as part of an order for 44 aircraft placed in 2007. It took delivery of six new aircraft last year and is expected to take delivery of another six this year.
It has added six routes to its network in the past 12 months. The new routes include Gassim and Yanbu in Saudi Arabia. In addition, the airline also launched non-stop services from its hub in Alexandria, Egypt, to Milan, and to Riyadh and Dammam in Saudi Arabia.
Profit at Air Arabia fell to Dh274m last year, Dh44m less than the previous year. But its decent dividend, good passenger numbers and ambitious expansion plans signal a solid investment opportunity.
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