Air Arabia to see profits fall 15 per cent in 2010

29 March 2010

Sharjah-based airline’s secondary hubs in Morocco and Egypt are not expected to be profitable until 2012

Sharjah-based budget carrier Air Arabia will see its profits fall 15 per cent in 2010 compared with 2009 on the back of a 19 per cent increase in fuel costs, according to analysts at Egyptian investment bank HC Securities and Investments.

Fuel costs fell 30 per cent in 2009 as oil prices fell to nearly $30 a barrel, boosting the carrier’s profits, HC says in the report. But costs have since rebounded along with oil, which is trading at $75-$85 a barrel.

The forecast drop in the carrier’s profits would also come as a result of new loss-incurring operations in Egypt and Morocco. The airline’s secondary hubs in Casablanca in Morocco and Borg El-Arab airport near Alexandria in Egypt are not expected to be profitable until 2012, according to HC.

Operations at Casablanca began in May 2009, while commercial operations at Borg El-Arab are expected to start before the end of April.

The new airport in Egypt will have a total capacity of 4.5 million passengers each year and host 32 regional and international airlines.

“We believe the two new operations will not have a significant impact on numbers in the near-term, but will be crucial drivers for Air Arabia’s future development as they gradually build up their fleets and destination offerings,” the report says. “They will only begin to contribute positively to consolidated numbers by 2012.”

The airline may also incur losses as its new Sharjah-based hotel begins operations in August 2010.

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