UAE’s Air Arabia plans to lease aircraft to raise fleet size to 90 by end-2024: CEO
With supply issues on new orders, leasing will help UAE airline meet its growth plans
Dubai: The Sharjah-based Air Arabia is en-route to expanding its fleet size to 90 aircraft before the end of 2024, adding more leased planes into the fold.
The airline CEO Adel Abdullah Ali told Gulf News growth plans “will continue regardless” of jet delivery delays caused by ongoing “supply chain and geopolitical challenges”.
“We have an order book of 120 aeroplanes, and because of the supply chain (issues), it has been shifted to the second half of 2025,” said Ali. Air Arabia, an all-Airbus carrier, was supposed to receive its order by the last quarter of 2024.
However, plane makers Boeing and Airbus have a huge backlog of aircraft still to be delivered. They have struggled to meet delivery schedules due to supply chain issues.
“However, to grow the business, we have leased airplanes. Last year, we got about 10. This year, we are getting about 8. So, we should be just over 90 airplanes by the end of 2024, which is within our target. In 2025, we will start receiving 120 orders in phases over five years,” explained Ali.
By the end of 2023, the airline operated 71 Airbus A320s and A321s. The airline is due to receive the new A320neos, consisting of 73 A320neos, 27 A321neos, and 20 A321XLRs. These will take Air Arabia's fleet total well beyond 100 aircraft.
Further expansion
Commenting on whether Air Arabia has plans to expand its fleet further, Ali said, “At the moment, any sensible person will say ‘Let me get the 120 first’.
“Let us look at the geopolitical (issues) and let the world become a calmer place. Let us (hope) the supply chain sorts itself out and all the engines in today's world become more mature. If all those happen, and the business continues to grow, we will need (more planes), and we will order.”
Materials like metals and windshields now take 2-5 times longer to procure than before 2020, due to less aerospace material production, a shortage of skilled workers, and fewer supply options due to the Russia-Ukraine conflict.
Ali said: “The sooner these problems go away, the better. We have seen progress year-on-year, and I have no reason to believe it will not go away. It is just taking its course because other things are influencing the change.”
The shortage of manpower in factories, including those supporting aviation, adds to these challenges, explained Ali.
While aviation faces heightened scrutiny, other industries like pharmaceuticals and medical equipment manufacturing face similar issues. “Despite these challenges, the aviation market is expanding globally, especially in regions like ours,” he added.
Q1 performance
The UAE budget carrier reported a net profit of Dh266 million for the first three months ending March 31, 22 per cent lower than in the corresponding quarter of 2023. In the same period, the airline posted a turnover of Dh1.54 billion, an 8 per cent increase. The airline’s Q4-2023 profits had also dropped.
Ali said, “I think it's fair to compare Q1 to Q1-23 because every quarter is very different. 2023 was a record year for the industry, including Air Arabia. We've done extremely well. In 2024, I think we are very happy about what we achieved. We think it's a good result”.
Ali said seasonality factors play a significant role in this region. In 2023, Ramadan mainly fell in March, with the peak travel period preceding Eid in April. This reversal impacted Q1-24 due to the shift in travel patterns. Additionally, currency fluctuations, such as devaluations in Egypt and Bangladesh, affected financial metrics, although some stabilization occurred by April's end.
“As the world gets normalised post-pandemic, there is a slight drop in the yield, which is normal,” he said.
Furthermore, human capital inflation adds to additional complexities. “As the year progresses, we are confident if everything stays as is, then there is going to be another good year,” Ali said.
The airline chief also said that passenger forward bookings are looking ‘very promising’. “Our plan to expand the business is there, and we have opened new routes.”
Will Air Arabia consider widebodies?
On whether the airline would consider buying wide-body aircraft and shifting away from the low-cost model, Ali said, “At the moment, we continue to work on the 'If it's not broken, don't fix it' model. The business model is working.
“Our business is narrow-body, and our aircraft orders will take us from the A321, which operates flights of about seven hours, to flights of about eight-and-a-half hours.
“Part of the order will be for 20 Airbus XLRs (extra long-range performance). Those would extend our range up to eight-and-a-half hours. That is sufficient for us.
“We don't feel a need to consider wide-body aircraft for now. What the future holds, I don’t know.”
The airline is flying to Southeast Asia and Europe with its existing XLR fleet within seven hours. “And once we get the new XLRs, then we will be able to expand further from all our hubs in UAE, Morocco, and elsewhere,” explained Ali.
New hubs
The airline has no immediate plans of opening new hubs; however, “At the moment, you know, we were just discussing the supply chain challenges and all the other associated issues, so it's more sensible for us to focus on expanding the existing hub and ensuring that we cater to the existing demand. Once these are sorted out, if a new hub becomes viable and we need to explore that option, we'll look at it. Right now, however, there's nothing on the table that I can share."
The airline operates from seven main hubs - Sharjah, Ras Al Khaimah, Casablanca, Alexandria, Abu Dhabi, Yerevan, and Karachi.
Network expansion
Ali commented on network expansion plans: "We have already started placing two additional aircraft in Morocco, setting up two additional operating bases in the capital of Morocco, Rabat, which were not there before, and one in Diwan, north of Morocco.”
He added, “We have also added an aircraft from our sister company, Fly Jinnah, in Pakistan. We added two more aircraft and expanded internationally, flying from UAE to Oman and Bahrain, with more destinations. Next month, we will be operating from UAE to Greece and Poland. Post-peak summer, we will explore new destinations for the winter.”
Ali said Air Arabia Abu Dhabi, established amidst the pandemic in partnership with Etihad Airways, has been the fastest-growing hub for Air Arabia. “We have ten aircraft and service to 28 airports from Abu Dhabi. Moving operations to the new terminal at Zayed International Airport has alleviated congestion and supported tourism infrastructure development. The expansion is promising, but acquiring aircraft is challenging due to industry shortages. Despite this, we aim to grow these routes organically,” he explained.
Recruitment plans
Given that Air Arabia’s business is growing at 11 per cent, Ali aims to boost the airline’s workforce by an additional 10 to 12 per cent. Air Arabia Group, including the associated hubs, employs 5,000 people.