By Edward Poultney and James Bennett
Leading regional investment player acquires stake in Sharjah's low cost carrier.
Investment fast riser Abraaj Capital has acquired an undisclosed strategic stake in newly listed Air Arabia and placed its two highest-ranking executives onto the carrier's senior management board.
The region's first low-cost airline listed an Initial Public Offering (IPO) on March 18 this year, the largest in the UAE's history. The IPO is due to close this Tuesday March 27.
The move by Abraaj, which has over US $2bn worth of assets currently under management, comes just days after the UAE Ministry of Finance and Industry subscribed to 5% of Air Arabia shares, the maximum it is allowed under UAE law.
In addition to acquiring a strategic minority stake in the Sharjah-based low cost carrier (LCC) Arif Naqvi, vice chairman and CEO of Abraaj Capital, and Mustafa Abdel-Wadood, the private equity firm's managing director, have joined Air Arabia's board of directors.
Naqvi said he was confident that the LCC sector was "poised for rapid growth" in the Middle East and South Asia region, with established airlines such as Air Arabia "especially well positioned" to benefit from strong demand for low-cost regional travel.
"As a pioneer in the LCC space and with world-class management, Air Arabia has rightly earned a reputation as the clear leader in its field," he added.
Abraaj has a strong investment track record and has led several companies through a successful IPO process including regional construction business Arabtec and Aramex International, the 25 year-old global logistics company founded and run by entrepreneur Fadi Ghandour.
Abdel-Wadood said: "By offering flights of not more than five hours and with best practice operational reliability and aircraft utilisation, Air Arabia keeps its planes in the air, rather than on the ground. Even more important, the airline is able to elevate its financial performance to equal heights."