Air Arabia third quarter profits decline 20% as fuel costs soar

Sharjah-based carrier reports Dh300m in profit, even as revenues rise

Budget carrier Air Arabia reported yesterday a 20 per cent decline in its net profit for the third quarter of 2018 even as revenues rose, as higher oil prices and currency fluctuations hurt earnings.

The Sharjah-based airline reported Dh300 million in profits, down from the Dh375.8 million recorded in the same quarter of 2017.

This brought net profit in the first nine months of 2018 to Dh530 million, down 17 per cent year-on-year.

Shaikh Abdullah Bin Mohammad Al Thani, Chairman of Air Arabia, said the global economic outlook “remains under renewed pressure,” with airlines around the world challenged by “pressured yield margins and increase in cost structure, while political and economic tensions continue to drive currency and oil price volatility. We believe that such impactful challenges are temporary, and the long-term outlook for the low-cost travel in the region remains fundamentally strong,” he said in a statement.

Concerns

His comments come as other airline executives voice similar concerns.

Yesterday, Thierry Antinori, chief commercial officer of Emirates airline, said profits are “badly hit” by rising fuel costs, saying it was “difficult to manage.”

Brent oil prices hit a high of $86.30 (Dh316.98) a barrel in October, up from around the $68 range Brent was trading in late last year.

Air Arabia saw a rise in revenues, however, as it carried more passengers.

The airline’s revenues for the third quarter of this year rose 10 per cent to Dh1.38 billion, with passenger numbers rising 5 per cent to 2.4 million.

Revenues for the first nine months were also higher, rising 8 per cent year-on-year to Dh2.8 billion. Passenger numbers in the first nine months reached 6.6 million.

Seat load factor

Meanwhile, average seat load factor — or passengers carried as a percentage of available seats — stood at 80 per cent in the first nine months of 2018.

Al Thani said Air Arabia’s focus on “generating profitable growth, combined with strong cost control measures” will deliver robust financial performance going forward while providing passengers with more travel options.

Air Arabia said two weeks ago that it was in early talks to buy at least 100 aircraft in 2019 as it aims to expand its fleet and replace old aircraft.

Adel Ali, Group CEO of Air Arabia, told reporters a decision on the order is likely to be made next year, after which the company will look at options for financing.