Air Arabia profit down 10% to Dh103m

Decline in first quarter amid drop in yield margins

Published: 17:17 May 7, 2017

By Sarah Diaa, Staff Reporter

Dubai: Air Arabia, the Sharjah-based carrier, reported on Sunday Dh103 million in net profit for the first quarter of 2017, marking a 10 per cent drop over the Dh114 million recorded in the same period in 2016.

In a statement, Air Arabia said it posted a first-quarter turnover of Dh810 million, a 14 per cent decline over the first quarter in 2016. The airline said the decline came amid a drop in yield margins across the industry over the first three months of the year.

The profits for the first quarter, though lower year-on-year, are a turnaround from the Dh38.6 million in losses recorded by the carrier in the fourth quarter of 2016. The loss at the time came well below market expectations, with the consensus being for a fourth quarter profit of Dh57 million. Air Arabia attributed the results to challenges in the global aviation market.

In Sunday’s statement on first-quarter performance, however, the airline struck a different note, discussing confidence in growth.

Shaikh Abdullah Al Thani, chairman of Air Arabia, said the carrier continued to see strong passenger demand, and that he remained confident “of the growth prospects of the low cost travel segment in the region”.

“We believe the market economic and trading conditions are on an improving trajectory, and we are optimistic that this will reflect positively on the industry’s performance for the rest of the year,” he stated.

Average seat load factor

Air Arabia said it carried more than 2.1 million passengers between January and March 2017, in line with the number of passengers it carried in the first quarter of last year.

Its average seat load factor (or passengers carried as a percentage of available seats) during the quarter reached 81 per cent.

“The challenge for this industry is, first, the cost, which is fuel prices, and that’s a major component. The second challenge is the utilisation factor, or the load factor, so they need to watch their capacity. Another issue is the competition, currency, and prices, so those are the major issues to watch for,” said Tareq Qaqish, managing director of asset management at Menacorp.

Airlines in the region have been citing currency fluctuations as one of the challenges impacting their performance. In November 2016, Emirates reported a 75 per cent year-on-year decline in profits for the first half of the 2016-2017 financial year, and cited a stronger US dollar as a factor impacting the decline.

From an operational perspective, Air Arabia added one new route from its main hub in Sharjah in the first quarter, with flights commencing to Baku in Azerbaijan. The carrier also took delivery of one new aircraft in that period, bringing its current fleet to 47 Airbus A320 aircraft operating to 126 routes across the Middle East, Africa, Asia, and Europe.

The company hasn’t yet released its financial statement to the Dubai bourse where it is listed.

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