Long Eid holidays likely to assist Air Arabia

Air Arabia expected to report good set of earnings on the back of higher passenger growth that may offset higher jet fuel costs.

Last year's long Eid holidays are expected to have contributed to higher passenger traffic for Air Arabia - and a nice dividend for investors.

Despite a fall in worldwide passenger numbers in the fourth quarter - a repercussion of European airspace restrictions because of severe weather - there was some gradual recovery towards the end of the year, with the Middle East outperforming the rest of the world.

"The Middle East continues to show robust growth and was still up 15 to 20 per cent year on year in the fourth quarter, which makes it by far the highest growth region globally," said Scott Darling, an analyst at Nomura Securities in Dubai.

Passenger numbers for Air Arabia are expected to be reported as strong, mostly because of the long Eid al Fitr holiday, which helped to offset higher jet fuel costs.

Air Arabia is expected to show a profit of Dh118 million, down 13 per cent compared with the third quarter.

"We would be buyers into results," Mr Darling said.

Air Arabia has historically paid high dividends, including 10 per cent last year. Mr Darling said the airline may continue to pay the dividend despite a decline in earnings last year.

However, there is a possibility that Air Arabia's fleet expansion will provide an opportunity for management to cut the dividend.

The airline received the first of 44 A320 jets from Airbus in October to support its international expansion plans. The additions will make its A320 fleet one of the largest in the region.

The company aims to expand its network and operations in Europe and the MENA region. Its network now consists of 65 international routes in the Middle East, Europe, the Indian subcontinent, central Asia and north Africa.

Air Arabia fell 0.7 per cent to close at Dh0.84 yesterday.