Air Arabia finds ways to chart a growth story even with a pandemic on
Budget airline’s 2021 numbers stack up well and sets it up for higher profitability
Air Arabia, the UAE low-cost airline with a market cap of Dh7.51 billion, remains largely unaffected by the Omicron variant and continues to see strong travel demand. As a result, the company is on a path to beat pre-pandemic level profits by 2024 and touch significant profitability in 2022. Improving earnings power will help Air Arabia deleverage its balance-sheet and invest more in new routes that can help build its market share.
2021 was challenging for the aviation industry because of the lasting impact of COVID-19 and the restrictions it imposed on air travel. Despite this, Air Arabia delivered remarkable results, showing a steady comeback thanks to a management team that enabled it to weather the storm. While many Western airlines were forced to resort to equity dilution, Air Arabia was able to safeguard shareholder interests. As a result, its financials are stable, with Dh3.87 billion in cash and cash equivalent.
India routes
In 2021, Air Arabia made consolidated net profits of Dh719.92 million, compared to net losses of Dh192.18 million the previous year. According to a bourse statement, it had Dh3.17 billion in sales, up 71 per cent from Dh1.85 billion in 2020. India, its key growth market, has relaxed travel curbs, and this has helped advance Air Arabia revenue numbers in the first quarter last year. The revenue jump between the third and fourth quarters was almost 62 per cent. Air Arabia has a strong presence in India, and recently launched additional flights to several Indian cities via its Abu Dhabi subsidiary.
Air Arabia has decided not to adjust its Airbus SE aircraft delivery timeline, which will begin in 2024, due to improved growth expectations. One of the most significant orders placed in the region was for 120 single-aisle Airbus A320 family aircraft in 2019, with a total book value above $14 billion. The transaction will more than increase Air Arabia’s fleet strength and support the carrier’s worldwide network growth goal.
As Air Arabia’s entire fleet gets back into operation, the shares could deliver excellent returns for investors. Notably, its total share count has been steady at 4.66 billion for several years, even amidst an earth-shattering pandemic. Existing shareholders have not suffered any dilution. This itself is a promising sign for any prospective shareholder.