Air Arabia Q3 net profit drops 9% 

(MENAFN - Khaleej Times) Air Arabia, the Middle East and North Africa's first and largest low-cost carrier, suffered a nine per cent fall in its third quarter net profit due to global credit crisis and concerns over H1N1 flu virus.

The Sharjah-based airline's net profit for the three months ending September 30, 2009, stood at Dh144 million, compared to Dh158 million for the same period in 2008. Despite lower year-on-year third quarter profit, the carrier's net is still beyond the expectations of analysts.

"Its 15 per cent higher than our expectation as Shuaa Capital was projecting third quarter profit around Dh125 million," Kareem Murad, Aviation Analyst at Shuaa Capital, told Khaleej Times on Saturday.

Murad said that as a result of the global economic crisis margins are tighter. Next quarter will also see pressure on margins with oil prices increasing, he added.

"Passenger traffic in the third quarter of 2009 was impacted by the seasonality of the Holy month, concerns related to the H1N1 virus and the continuing consequences of the global financial downturn," Air Arabia said.

Nine-month net profit jumped six per cent to Dh337 million, compared to $318 million from a year ago, but turnover for the period fell two per cent to Dh1.46 billion, the carrier said.

The airline served more than 2.96 million passengers during the first nine months, an increase of 14 per cent compared to 2.6 million passengers it carried during the same period last year.

International passenger traffic is expected to decline by four per cent this year and losses likely to widen to $11 billion from an earlier projection of $9 billion, according to the International Air Transport Association, the world's largest trade group for airlines.

"At a time when the worldwide airline industry is projected to witness collective annual losses approaching $11 billion, we .... continue to exceed expectations," Adel Ali, Board Member and Group Chief Executive Officer of Air Arabia, said.

Air Arabia's average seat load factor — or passengers carried as a percentage of available seats — for the first nine months of 2009 stood at 79 per cent.

"The challenges that lie ahead, especially in the short term, remain significant," Ali said.

The airline serves some 59 destinations across the world, from its hubs in Sharjah and Casablanca.

In September, Air Arabia announced the signing of a joint venture agreement with the Travco Group to launch a new low-cost carrier based in Egypt, serving the Europe, Middle East and Africa markets and representing the carrier's third hub after the UAE and Morocco. Operations at the third hub in Egypt are expected to begin in early 2010.

"We are planning to start operations in the first quarter of 2010," Adel Ali told reporters on the sidelines of a conference in Al-Ain on October 12.

Air Arabia announced in the third quarter that construction of its 300-room three-star Centro Hotel at Sharjah Airport would be complete by April 2010.

By Abdul Basit