Air Arabia posts a net loss in first half due to flight suspensions amid pandemic

Sharjah-based airline took measures to preserve liquidity including deferred capital expenditure, workforce restructuring and cost rationalisation

An Airbus A321 jet with an Air Arabia livery. The Sharjah-based carrier posted a net loss in the first half of the year as a result of Covid-19's impact on the travel industry.

Air Arabia, the UAE's only listed carrier, reported a net loss of Dh169 million in the first half of the year due to flight suspensions triggered by the Covid-19 pandemic in the second quarter.

The Sharjah-based airline's revenue in the first six months of the year to June 30, plunged 53 per cent to Dh1.02 billion year-on-year as passenger traffic at its four hubs more than halved.

Air Arabia carried 2.48 million passengers from its hubs in Sharjah, Ras Al Khaimah, Morocco, and Egypt during the first half, a 57 per cent drop from the year-earlier period.

“Air Arabia started the year 2020 with strong performance promising another year of growth and profitability. However, the unprecedented impact of Covid-19 left airlines worldwide battling the strongest challenge in its history," Sheikh Abdullah Bin Mohamed Al Thani, chairman of Air Arabia, said. The full impact of Covid-19 on airline operations was fully materialised in the second quarter as a result of border closures and flights suspension across all key markets."

The budget carrier's operations in the second quarter were limited to repatriation, charter, and cargo flights after the UAE suspended scheduled passenger flights to curb the spread of the virus.

The second quarter saw the most severe impact of the coronavirus crisis on airline operations, Air Arabia said.

The carrier posted a net loss of Dh239m in the three months to June 30 as quarterly revenue fell to Dh120m, down from Dh1.14bn in the same period last year.

The budget carrier took measures to reduce costs and preserve liquidity amid the pandemic. These included deferred cost and capital expenditure, workforce restructuring and cost rationalisation.

In May, Air Arabia said it is reducing its workforce by about three per cent, joining global carriers in taking measures to cope with the plunge in air traffic demand, due to the Covid-19 pandemic. The carrier, which has about 2,000 employees in total, cut 57 jobs, it said at the time.

“Air Arabia’s robust business model allowed the management team to act fast and take necessary measures to control cost and enhance liquidity while operating a mix of commercial flights where possible,” Mr Al Thani said. “These early measures have resulted in preserving cash and limiting the net loss of the first half to acceptable levels, while still being able to mobilise people during this intricate time and support repatriation efforts.”

The global aviation industry’s prospects “remain strong” as airlines play a key role in the global economic recovery, the airline’s chairman said.

Even as some markets around the world gradually re-open, the pandemic will have a “lasting impact” on the aviation industry with recovery expected to be gradual, he said.

“At Air Arabia, while we remain in a strong position weathering the Covid-19 impact, we continue to look at this challenge with a long-term view keeping business continuity as the prime focus,” Mr Al Thani said.

Currently, Air Arabia operates a mix of scheduled, repatriation, charter and cargo flights across its hubs.

Last month, Air Arabia Abu Dhabi, the UAE capital’s first low cost carrier, began operations from its base at Abu Dhabi International Airport.

Middle East air passenger traffic is expected to fall about 56 per cent, or by more than 113 million passenger journeys, and demand is not expected to return to pre-coronavirus levels until 2024, the International Air Transport Association said in its revised five-year forecast last month.

Passenger demand, which is measured in revenue passenger kilometres – an industry metric that shows the distance travelled by paying passengers – is down by about 60 per cent, Muhammad Albakri, Iata’s regional vice president for Africa and the Middle East, said on July 28.

Globally, the number of flights fell by 50 per cent in late July, compared to the early January period. The number of flights dipped by 80 per cent in April – the lowest point so far. In the Middle East, flights were down about 70 per cent, compared to the beginning of the year, Iata said.