Concerns over unrest and soaring fuel prices has curbed plan to establish hub, CEO says
Air Arabia, the Middle East’s biggest low-cost carrier, has halted plans to establish a hub in Jordan amid concern about political unrest in the region and the impact of higher fuel prices.
“We felt there was no point and shelved it for the time being,” chief executive officer Adel Ali said on Tuesday in an interview in Dubai. “As soon as the situation is clearer we will look at it again.”
Protests that began in North Africa in December have led to the biggest upheaval in the Arab world in at least four decades. Tunisian and Egyptian leaders have been unseated and violence continues in Yemen, Libya and Syria on Jordan’s northern border, with protesters demanding representative government and jobs.
The price of oil has also climbed 30 percent in the past 12 months, reaching $114.83 a barrel May 2.
Air Arabia, which is based in Sharjah in the UAE and currently has secondary hubs in Alexandria in Egypt and Casablanca in Morocco, will focus growth on routes to Russia, India and parts of North Africa, Ali said.
The Egyptian hub will be further expanded should the situation in the country improve and the carrier is separately planning regular charter flights to seven cities in Germany from resorts on the Red Sea starting next month, he said.
Air Arabia’s load factor, or seat-occupancy level, stood at 82 percent as of the end of last month, the CEO said, adding that yields, a measure of pricing, are at “fantastic levels.” Net income fell 14 percent in the first three months on the regional unrest and higher fuel costs.
The stock rose 0.3 percent to close at 69.2 fils in Dubai, reducing its decline this year to 16 percent and valuing the company at AED3.23bn ($880m).
The discount carrier, which operates a fleet of Airbus SAS short-haul aircraft, is “very interested” in the European manufacturer’s re-engined A320neo model, though it’s also considering Boeing Co 737s, Ali said.
Air Arabia has a fleet of 27 current-model A320s and has 44 of the planes, valued at $3.6bn, on order, with deliveries that began last October schedule to continue until 2015-2016.
The carrier is in talks with export credit agencies and international banks to secure $160m in financing for four aircraft remaining for delivery this year, Ali said, two already having arrived.
“Nine out of 11 banks gave us a positive response,” he said. “By the end of this month we would conclude this.”
The airline, which has more than AED2bn in cash, is not considering a bond issue at this stage, though with plans to add three or four destinations each year until 2015, it is constantly reviewing its fleet and financing plans, Ali said.
There are no plans to place new aircraft orders this year, and Air Arabia continues to look at leasing as an option to meet expansion needs when they arise, he added.
Spend your money and energy on the SHJ airport infrastructure. Can we as well have some clean and neat toilets atleast. Some proper dining area so that we don't feel we are in third world country rather than UAE.