In its research report on Air Arabia, Shuaa Capital projected encouraging performance for the low cost carrier based on the company’s competitive strengths, projected financial performance, and general economic and demographic conditions.
The report highlighted Air Arabia first mover advantage, its ability to scale up, a young fleet and the high utilization rate of its aircraft. In addition, Air Arabia enjoys a low cost base, which when coupled with the favorable home and regional markets dynamics is expected to positively impact its projected financial performance for the next few years.
Kareem Murad, senior Transportation and Logistics Sector analyst at Shuaa Capital, said “Air Arabia pioneered the low-cost carrier model in the Middle East, thereby being the first provider for a service of this nature in a market that has almost zero percent penetration rate. In addition, the demand for air transportation has risen substantially over the last few years, and the trend is poised to continue in light of the rise in demographics, growth in tourism, as well as deregulation, liberalization and improved infrastructure. All of these elements help to solidify Air Arabia footing, and reflect extremely well on the company’s future.”
Due to the fact that air travel’s price elasticity of demand is high, coupled with the low penetration rate, Shuaa Capital expects low-cost carriers to enjoy higher growth rates than conventional airlines in the region.
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