Air Arabia net profits rise 30%

Air Arabia, the Sharjah-based low-cost carrier, reports a 30 per cent surge in third-quarter net profit.

Air Arabia posts a net profit of Dh214m in the third quarter and a 34% increase in passengers.

Air Arabia, the Sharjah-based low-cost carrier, has reported a 30 per cent surge in third-quarter net profit based on an increase in passenger numbers. For the three months to Sept 30, net profit rose to Dh214 million (US$58m), up from Dh165m in the previous corresponding year. Despite the general economic downturn and escalating fuel prices, Air Arabia's management is confident that its low-cost business model will continue to succeed.

"We believe that this is a difficult and challenging time for all airlines, but at a time when people are strapped for cash budget airlines always do well," said a spokesman from Air Arabia. The airline served 978,794 passengers in the third quarter, an increase of 34 per cent compared with 729,745 passengers during the same period last year. Average seat load factor, or passengers carried as a percentage of available seats, reached its highest level of 87 per cent. "Last year, our load factor was 86 per cent and I think the reason it's higher this year is because in this part of the world air travel is the only means of transport, because we still don't have trains or railways as other options," said the spokesman.

For the first nine months of this year, the company posted a net profit of Dh374m, up 34 per cent from Dh280m during the same period last year. Turnover for the nine months rose to Dh1.49 billion, an increase of 68 per cent compared with Dh889m for the same period the previous year. "Right now we are starting to notice that the price of fuel is stabilising, and if this will continue I'm sure that we will further reduce our ticket prices," said the spokesman.

Also during the first nine months of this year, the airline served a total of 2,601,967 passengers, an increase of 33 per cent compared with 1,954,982 passengers in the same period last year. The spokesman said so far the airline's future bookings "look good, and we are hoping that the coming period's results remain strong, but no one knows how bad this part of the world will be affected by the slowdown".

Last November, the company announced plans to purchase up to 49 Airbus A320s to expand its existing fleet of 16 aircraft. "These aircraft will be added to our fleet gradually, meaning that by the end of each year till 2011 four aircraft will be added," said the spokesman. The airline has set out on a strategy for opening new hubs in the region after raising Dh2.56bn in an initial public offering last year and targeting local airlines in Nepal and Morocco with which to form joint ventures and begin low-cost carriers.

Air Arabia Maroc, as the Moroccan budget carrier will be known, was scheduled to launch last month from the city of Rabat, but last week Air Arabia announced the venture would not get off the ground until the first quarter of next year, and would use Casablanca instead of Rabat as its base for flights to Europe and Africa. Adel Ali, the chief executive of Air Arabia, said the 11th-hour switch was made after it became clear that Rabat airport was undergoing a multi-year improvement project that would have been too disruptive. He also said Casablanca offered an ideal opportunity by itself, with few low-cost carriers operating there. "It is also the commercial gate and the biggest populated city in the country."

Mr Ali was less sure of Nepal, where Air Arabia was planning a second hub project. After partnering with Yeti Airlines, a full-service carrier based in Nepal, Air Arabia launched FlyYeti.com, a new budget carrier, in January. But six months later, Air Arabia pulled its aircraft out of the country, citing political instability as a new government prepared to come to power, and promised to return as soon as the situation improved.

"It meant we were making decisions month by month, which is not the right thing to do for the long-term business," said Mr Ali. Air Arabia is still examining other markets in the Middle East, where there is a strong case for launching new budget carriers. "We may still open up one or two new hubs in the future," he told delegates at an airline conference last week. But as the Middle Eastern airline is on the lookout for ways to expand its business, airlines in Europe and the US have been less fortunate. The US-based ATA Airlines, Skybus Airlines and Aloha Airlines all have filed for bankruptcy in recent weeks, and all cited some combination of high fuel prices and falling demand, among other factors.

In Europe, major airlines said last week that the economic slowdown had cut passenger numbers in September and they did not expect a turnaround in the near future, while British Airways's half-year pre-tax profits tumbled from £616m (Dh3.5bn) to just £52m over the summer period. The Association of European Airlines, which represents 35 carriers, said this was the first time in 25 years that the economy had caused traffic to fall. * with Associated Press @Email:[e-mail] [e-mail]