Dubai: Declining passenger yields have reduced Sharjah-based budget carrier Air Arabia's profitability by 51 per cent to Dh50 million during the first quarter of 2010, compared to Dh103 million in the corresponding period last year.
This happened despite a 9.2 per cent increase in the number of passengers to 1.03 million that earned Air Arabia revenues of Dh482 million during the first quarter, a 4 per cent increase over the Dh463 million earned in the corresponding period last year.
Air Arabia's average seat load factor — or passengers carried as a percentage of available seats — stood at an impressive 80 per cent, sustaining the carrier's performance from the previous period.
"This decline in profitability was in line with global trends of the aviation industry's performance represented by the increase in fuel costs as well as continuous pressure on yield margins," the airline said in a statement.
Strong hub market
The airline's launch of Egypt operations, which is expected to be its launchpad for European operations, could reverse the downward trend going forward. Backed by a strong hub market, Egypt is the top Arab tourism market and attracts traffic from Europe.
Rising jet fuel prices, which increase in line with crude oil prices, remain a concern for all airlines globally, including Air Arabia.
"The lingering impact of the global financial crisis and the rise in fuel costs continues to affect the profitability of airlines worldwide as a result of continuous dilution in yields versus market overcapacity.
"Nevertheless, Air Arabia posted appealing profits for this quarter and maintained its positive growth in passenger numbers," said Adel Ali, board member and group chief executive officer.
Air Arabia currently operates services to 60 destinations in Europe, the Middle East, Africa and Asia from its hubs in the UAE and Morocco.
