Dubai: The region's oldest low-cost carrier Air Arabia has suffered a 44 per cent drop in second-quarter net profit to Dh50 million fuelled by increased fuel costs and continuous pressure on yield margins.
In the second quarter, Air Arabia's turnover increased by six per cent to Dh485 million compared to Dh458 million in the same period last year.
"The decline in profitability was in line with global industry performance, which continues to be impacted by changing market dynamics," a company spokesman said.
The airline said it served 1.1 million passengers during the three-month period, an increase of 11 per cent over the same period a year earlier.
The airline's average seat load factor, a measure of performance, jumped four per cent to 82 per cent.
"Air Arabia continues to post sustained quarterly profits with a high seat load factor and rising passenger traffic. These results demonstrate the strength of Air Arabia's business model and long-term expansion strategy," Air Arabia Chairman Shaikh Abdullah Bin Mohammad Al Thani said in a statement,
Last month, the airline placed a $620 million order for GE engines to power its Airbus A320 aircraft that are on order. It plans to move some of the new aircraft to Alexandria, Egypt, the third hub it launched during the third quarter, and to Morocco, as it starts to serve new European destinations from those hubs.
In June, the company announced plans to launch a new budget carrier in Jordan, in a joint-venture with Tantash Group.
Kareem Murad, aviation analyst at Shuaa Capital said: "I'm still optimistic and positive about the company although its bottom line missed my estimate by 23 per cent".
Revenues were in line with estimates on expected pressure on yields, with optimism for the third quarter performance.
"The main reasons were that costs were higher on one off costs related to the launch of the Egypt hub and joint-venture in Jordan," he said.
Air Arabia would continue to see competitive pressure from traditional carriers such as Emirates, and the possibility of a fuel surcharge.
The share price ended flat on Dubai's exchange at Dh0.848.
Air Arabia currently serves 65 routes from three hubs in the UAE, Morocco and Egypt.
- 44% value of fall in second-quarter profit
- Dh485m value of airline's turnover in second quarter
- 1.1m passengers served in three months
