Air Arabia Q2 profit dips 24% on flat passenger numbers

Airline says high fuel prices, seasonal travel flows and lower-yield margins hit the aviation industry

The airline carried 2.05 million passengers in the second quarter, unchanged from the same period last year. Maja Hitji / EPA
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Air Arabia, the UAE's only publicly-listed airline, posted a 24 per cent decline in second-quarter net profit as the number of passengers carried and seats filled remained flat.

Net profit in the three months ending June 30 reached Dh120 million compared with Dh158m a year earlier, it said in a statement on Thursday. EFG Hermes and Sico Bahrain had forecast the Sharjah-based low-cost airline would post a profit of Dh148.4m and Dh85.98m respectively. Quarterly revenues increased four per cent year-on-year to Dh938m.

"Trading conditions continue to be influenced by the regional geopolitical and economic challenges," Sheikh Abdullah Al Thani, chairman of Air Arabia, said.

The International Air Transport Association, which represents about 280 carriers, slashed its forecast of global airlines' profits by 12 per cent to $33.8 billion this year as the industry faces higher fuel costs and geopolitical tensions that would increase its operating risks.

Air Arabia said it recorded "strong profits" despite the "economic pressure that airlines have witnessed in the second quarter of this year, which was driven by lower yield margins, higher fuel prices and seasonality shift in traffic that the market has experienced."

The airline carried more than 2.05 million passengers in the second quarter, little changed from the same period last year. Load factor-a measure of seats filled-reached 78 per cent compared to 79 per cent a year earlier.

In June, Air Arabia said it has a $336m exposure to funds managed by the Abraaj Group, the Dubai-based private equity firm that has filed for provisional liquidation. The airline said there is "no significant impact" on its business or liquidity status and that it has appointed a team of experts to ensure its rights are being protected during the court-supervised restructuring of Abraaj's funds.

Air Arabia operates flights from hubs in the UAE, Morocco, and Egypt to more than 150 destinations with a fleet of 53 Airbus aircraft.

The airline is considering both Boeing 737 and Airbus A320 models for a 100-plane requirement worth about $11bn at list prices,  Adel Ali, Air Arabia chief executive, told Bloomberg in July during the Farnborough air show.

It may be worth absorbing the extra costs of running a mixed fleet if Boeing’s jets are more competitive, he said. The carrier needs the new planes both for fleet renewal and for growth.

The airline added 12 new routes to its network in the first half of 2018, it said.