Air Arabia's Q4 profit drops on softening yield margins and supply chain issues

The UAE's only listed airline recoded double-digit growth in profitability and passenger numbers in 2023

Air Arabia added 26 routes to its global network in 2023. Photo: Air Arabia

Air Arabia, the UAE's only listed airline, has reported a 37 per cent annual drop in fourth-quarter net profit despite an 11 per cent yearly increase in revenue for the period.

Net profit for the three months to the end of December fell to Dh225 million ($61.25 million) due to a “softening in yield margins and supply chain challenges”, the budget airline said.

The same quarter in the previous year had witnessed “record high yield margins”, the company said.

Revenue for the last three months of 2023 rose by 11 per cent to Dh1.54 billion while passenger seat factor, a metric used to measure the efficiency of an airline in filling seats and generating revenue, remained strong at 81 per cent.

“Despite the softening in yield margins during the last quarter of the year and the ongoing challenges in the industry's supply chain, Air Arabia demonstrated resilience by registering a solid profitability while maintaining an impressive seat load factor and growth in revenue and passenger numbers,” its chairman Sheikh Abdullah Al Thani said.

The global aviation industry has registered a robust comeback since most countries lifted their Covid-19 restrictions and people resumed business and leisure travel.

However, economic uncertainty, high oil prices, elevated inflation and supply chain delays have proved to be a challenge for the industry as airlines step up operations to keep pace with demand.

Net profit for the full year jumped 27 per cent on an annual basis to a record Dh1.5 billion, while revenue rose 14 per cent to Dh6 billion.

The airline carried 16.7 million passengers, up from 12.8 million in 2022.

Air Arabia operates seven hubs in the UAE, Morocco, Egypt, Armenia and Pakistan.

Last year, the budget airline introduced 26 routes to take its global network to 206 destinations, serviced by a fleet of 73 Airbus A320 and A321 aircraft across all hubs.

“This strategic expansion resulted in an increase in operational capacity, which was further complemented by an impressive 31 per cent surge in the number of passengers carried across the group, reaching a remarkable 16.7 million passengers,” the company said.

Mr Al Thani said 2023 had been “a remarkable year” for the airline.

“Air Arabia has successfully maintained its growth momentum from the previous record-breaking year and achieved exceptional financial and operational results,” he said.

“Despite the numerous geopolitical and economic challenges faced by the global aviation industry, the Air Arabia group managed to sustain its strong growth in 2023.

“This was achieved through the increase of operating capacity and the addition of new routes across our global network from all our hubs.”