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Sun 3 Jun 2012 08:40 AM

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Flying high

Air Arabia CEO Adel Ali looks back on the carrier’s extraordinary growth — and what needs to be done to secure the region’s aviation future

Flying high

Air Arabia has come a long way since it shook up the aviation industry in the Middle East eight years ago. The airline industry in the Arab world could do with another shake-up by going down the privatisation route, the low cost carrier’s CEO Adel Ali says.

The most successful airlines in the US and Europe, respectively, have been SouthWest and Ryanair — neither of which have been government-funded.

“It’s not a secret that most airlines in the Arab world are a burden — governments have to pump money into them to keep them alive,’’ Ali says. He points out that the US has had to bail out 23 airlines in the past ten years — and calls for the responsibility to be shifted to the private sector, through appropriate legislation.

 “I’m aware of six or seven government airlines that have been thinking about going private in recent years,’’ Ali says. “Airlines are expensive things — in most places, you find that the government is spending a lot of money on them.’’

Going public is a “double-edged sword — it exposes you, but it brings a lot of discipline to the business,’’ he says. “Once you have shareholders you need to be accountable…that’s what our focus is all about.’’

Despite the high oil prices, Air Arabia, the largest budget airline in the Middle East, which presently operates out of Sharjah, Morocco and Egypt, reported an eleven percent increase in first quarter profit which reached AED49.3m ($13.41m) and served 1.23 million passengers in the first three months of the year, or seven percent more than in the same period last year. The airline’s average seat load factor was 82 percent.

“The business seems to be good, forward bookings are good, we’re hitting the summer season, we’re expecting a good year,’’ Ali says when asked if he expects the same growth rate in the remaining three quarters of the year.

 The price of $85 to $95 a barrel of oil is “good’’ for the aviation industry, Ali says. “Plus or minus $100 is reasonable for the seller and the buyer,’’ he says, adding “let’s be realistic — oil will not go to the $70s and $60s.’’

High oil prices have impacted the bottom line of airlines, with Emirates, the largest carrier in the world reporting a 72 percent decline in 2011 profits because soaring fuel prices accounted for nearly half of its costs.

Political instability and higher fuel surcharge prompted Air Arabia to call off establishing a fourth hub in Jordan last year. The Sharjah-based Air Arabia, which competes with Kuwait’s Jazeera Airways and Flydubai, operates Airbus SAS A320 single-aisle planes, and has a fleet of 30 aircraft with 35 to be delivered through 2015-2016. Some 44 A320s have been ordered in total at a list price of $3.6bn.

“In the next twelve to fifteen months we will have to look and review our fleet planning,’’ Ali says when asked if the airline plans to order additional planes as it expands its network and adds a possible fourth hub to its operations as the global economy picks up and regional stability sets in.

“These hubs came with their challenges,’’ Ali says, as he looks back at the steady expansion of the carrier. “Nobody wanted us; everybody assumed that we would fail,’’ when the company started operating, he recalls. “Some people felt that our life would not extend beyond six months. All those comments were fantastic because you prepare to die but not to fail. I’m glad they did that because if they had said 'fantastic' we would have relaxed.’’

“The trick is not to just do what you think is the best, you do what’s best to protect your bottom line in this business,’’ Ali says. “We decided to remain consistent. We have not changed our business model. All the temptation we’ve seen in the last eight years, we said it’s not our core business, keep it aside and focus.’’

The benefits for Sharjah have been massive, he says. From 1,000 employees to 12,000, the influence of Air Arabia — despite being a relatively small airline — has boosted the local economy significantly, Ali points out.

“If the aviation industry was a country, it would be in the G8 — that’s how big its ‘GDP’ is, in terms of what it offers on economy,” he says.

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JKC 7 years ago

Adel, before you talk about privatisation and other matters that don't really matter, you should consider about things that matter.

1. Upgrade your planes. Some of your aircrafts gives nightmares for passengers.
2. Upgrade the airport terminal to some class level. It feels like third world country.
3. Inject professionalism among your crew, most of them looks like school drop-outs and lack basic skills.
4. If you don't know how to do it, then do not do radio adverts at all. They are ear-sore.