Adel Ali, chief executive officer of Air Arabia 20190430
Adel Ali, chief executive officer of Air Arabia Image Credit: Ahmad Ramzan/Gulf News

Dubai: After having to pay over Dh1 billion in impairments on the now-bankrupt Abraaj, the head of Air Arabia called the private equity firm “version two of Lehman Brothers,” the financial services firm that filed for the largest bankruptcy in American history in 2008.

Air Arabia, which had $336 million (Dh1.2 billion) invested in Abraaj funds, reported in mid-February Dh609.5 million in losses for the full-year 2018, compared to a profit of Dh630.6 million a year earlier. The losses came as the Sharjah-based company paid Dh1.1 billion in impairment costs on its exposure to Abraaj.

Adel Ali, chief executive officer of Air Arabia, said on Tuesday that the airline reported the full impairments on that exposure in 2018, meaning that it won’t report any further costs related to Abraaj this year.

“We decided to take a one-year loss and move on. The Abraaj investment had absolutely no impact on the company’s strategy, growth, financial issues, and hopefully, we will have a good year 2019 and life will be back to normal,” Ali said during a panel talk at the Arabian Travel Market (ATM) exhibition.

“Somebody asked me about what happened with Abraaj Capital, and my answer was, ‘Do you remember 2008 Lehman Brothers? It’s version two of Lehman Brothers.’ We lost an investment that we made in private equity. The legal side is taking care of it [now]…”

Abraaj, once the largest private equity firm in the region with as much as $14 billion worth of assets, filed for provisional liquidation in the Cayman Islands in June 2018.

Unlike Lehman Brothers, Abraaj did not precede a crisis like the financial crisis of 2008, but its liquidation filing raised questions in the region on corporate governance, prompting Dubai authorities to look into tightening regulations.

Of all publicly listed companies in the UAE, Air Arabia had the largest exposure to Abraaj.

But on Tuesday, the low-cost carrier’s CEO said the company was still focused on growing its operations and fleet.

Ali said he expected Air Arabia to take another three to four months before placing an order for 100 or more aircraft. Though no decision has yet been made on which model(s) will be ordered, Ali said he was considering both Airbus and Boeing aircraft.

Some of the new aircraft will be to replace the current fleet and the rest will be to grow the airline’s operations.

“[We’ll go for] whoever comes up with a better option,” Ali said, hinting that Air Arabia may even opt for Boeing 737 Max’s.

“For us, by the time we make those decisions, one would hope that Boeing would have sorted things out,” he said as 737 Max’s around the world remain grounded for safety reasons after two fatal crashes involving the model.

The CEO said Air Arabia is looking for aircraft that will provide longer ranges so it can operate medium-haul flights, adding that he was interested in increasing operations into North Africa, China, and niche markets in Europe.

Air Arabia will launch in July direct flights between Sharjah and Kuala Lumpur, with a flight time of seven hours, making the route the airline’s longest. Ali said the airline will add more medium-range flights as it takes delivery of new aircraft.