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Sun 28 Jan 2007 12:00 AM

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Air Arabia flies in flotation

The UAE’s only low-cost carrier has revealed it will become the first Gulf airline to go public in the next three months.

The UAE’s only low-cost carrier has revealed it will become the first Gulf airline to go public in the next three months.

Sharjah-based airline Air Arabia has announced that it plans to launch an Initial Public Offering (IPO) in the first quarter of this year at either the Dubai Financial Market (DFM) or the Abu Dhabi stock market with Shuaa Capital appointed to oversee the transaction.

The offering is set to raise the necessary funds to enlarge the carrier’s fleet with the company aiming to order an additional 25 planes to its existing nine Airbus A320s as well as growing its operations with the addition of several new destinations including the recently launched Karachi and Peshawar in Pakistan.

A spokesperson for Air Arabia said: “We are targeting a fleet of 34 planes in five years, but we have not decided which manufacturer, Boeing or Airbus, we will choose, nor which types of planes we will purchase. It might be a mix.”

Adel Ali, CEO of Air Arabia, explained that despite local market volatility the airline had decided to launch the offering at a UAE bourse as IPOs were still “largely oversubscribed” in the region, and that investors’ appetite for prosperous companies with strong fundamentals “remained strong”.

“Stock markets certainly do have their own behaviour patterns, but regardless of how unpredictable they are, they usually raise multiples of their original offerings,” he said. He added that the DFM’s IPO was an example of a recent offering that had been 300 times oversubscribed. Air Arabia, Ali said, was especially promising for shareholders, as the carrier had only launched in October 2003 and had become profitable in just 14 months.

Makram Kubeisy, managing director of Shuaa Capital's investment banking advisory, agreed that local stock markets still hold lucrative potential for companies that are aiming to float in the near future.

“We believe that local equity markets are still an attractive source for growth capital for companies if they have a successful track record, such as Air Arabia.

“Air Arabia is a landmark for both the sector and the region. The carrier is financially sound and has a strong management team that has significantly grown the business and profitability in a remarkably short span of time,” he said.

The low budget airline has catered for more than 3.4 million customers since it began operations, and services 32 destinations across the Middle East, North Africa, the Indian subcontinent and Central Asia.

Air Arabia in figures

US$217m:

Air Arabia’s estimated profits for 2006

1.4 million:

Estimated number of passengers carried in 2006

2003:

Year it was launched

32:

Number of destinations

Nine:

Fleet of US$45m Airbus A320s

80%:

Average annual seat factor operated for the majority of Air Arabia’s routes

Alexandria:

The airline’s best route according to its CEO. “We are flying there twice daily and it is probably the highest single destination that we carry passengers to.”

Following the Kuwaiti government’s decision to open it’s aviation borders to competition, Jazeera Airways, launched in October 2005, is the only other low-cost airline operating in the Gulf. The carrier now flies to 13 destinations and has a fleet of five Airbus A320s.

Sama Airline, with a paid up capital of US$53.3m, has also been established to offer budget flights in the Kingdom of Saudi Arabia from early 2007 while Saudi Arabian Airlines has also announced plans to launch its own low-cost operation.

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