Air Arabia plans expansion as profit triples

Air Arabia, the Middle East's biggest low-cost airline, said fourth-quarter profit almost tripled after it carried more passengers and added destinations.

Routes to India, Egypt and Syria led.

The Sharjah, UAE-based carrier said net income in the three months to December 31 surged to 89.52 million dirhams ($24.38 million) from 32.65 million dirhams in the year-earlier period.

The number of passengers rose almost 50% to 745,000, it said, pushing revenue up 62% to 349.3 million dirhams. Average load factor for the year - the percentage of seats occupied on each flight - was 86%.

"The economy is good, demand is good," Chief Executive Adel Ali told newswire Reuters after the company released its results.

"In this region of oil producing countries, high oil prices are more positive as it generates a strong economy, and makes people travel," Ali said.

Sharjah is a member of the UAE federation, the world's fifth-largest oil exporter. Oil prices have more than quadrupled during the last six years, spurring economies of the Gulf, the world's biggest oil-exporting region.

That has attracted workers from around the world, especially South Asia, the Middle East and the Philippines. Routes to India, Egypt and Syria led income in the fourth quarter, Ali said.

The airline, whose stock has almost doubled since it sold shares in an initial public offering last year, will probably carry 25 to 30% more passengers this year as it expands its fleet to 14 from 11, and adds destinations in India and the Middle East, Ali said. He declined to be more specific.

The company, which in November ordered $3.5 billion of aircraft from Airbus SAS, carried 2.7 million passengers last year, an increase of 53%, it said.

Air Arabia, the first airline in the Middle East to go public and listed in Dubai in July last year, flies to 37 destinations in the region, South and Central Asia, and North Africa, using leased Airbus A320 aircraft.

"We hope in 2008 we will have a similar load factor to last year," Ali said. "It should be the same or better".

In a Reuters survey in December, Deutsche Bank and Egyptian investment bank EFG-Hermes respectively forecast Air Arabia would make a profit of 86 million and 96 million dirhams.

Last month, the airline agreed to create a low-cost airline venture with Nepal's Yeti Airlines, called FlyYeti.com, using Kathmandu as a hub for flights to India and Kuala Lumpur.

A similar initial agreement last year to use the Moroccan city of Rabat as a hub for North Africa and Europe will take "at least another six months" to implement, Ali said.

"We're still working on it," Ali said. "There are legal issues and infrastructure to build."

Using the aircraft it has bought from Airbus, Air Arabia plans to expand its fleet to more than 50 by 2015. Kuwait's Jazeera Airways is the only other listed airline in the Gulf. Also a low-cost carrier, it listed last month.

State-owned Gulf airlines such as Emirates, Qatar Airways and Etihad Airways have led orders for Airbus and Boeing during the last few years.

At an airshow in Dubai in November, Gulf Arab and other carriers ordered aircraft worth as much as $83 billion.

Shares of Air Arabia rose 0.49% on Wednesday, before the results were announced. The stock is up about 3.5% this year.

Citigroup Inc last month started coverage of Air Arabia with a "buy" recommendation. EFG-Hermes in November maintained its short-term "accumulate" and long-term "buy" recommendations. (Reuters)