Air Arabia; the world’s most profitable carrier does it again – Share Wrap

Air Arabia has converted a 21% increase in first quarter revenue into a 32% increase in net profit, producing an industry leading net margin of 22% - an outstanding achievement given the global economic environment (and even better than Allegiant’s 19.7% 1Q09 margin). Superb fleet utilisation rates, low fuel prices, a simple operating model and a dominant position within the growing Sharjah economy are the hallmarks of Air Arabia’s success. However, the arrival in a couple of months of FlyDubai could mark the start of the erosion of Air Arabia’s stunning run of profit growth.

Air Arabia handled 951,000 passengers in 1Q2009, up 26% year-on-year, while average load factor reached 81%. Recently, the carrier officially launched Air Arabia Maroc, a Casablanca-based JV that aims to leverage Morocco’s vertical open skies agreement with the EU. Diversifying beyond the Middle East market is a sensible strategy as competition from other LCC entrants intensifies.

Air Arabia’s shares closed 3.2% higher on Friday and are up around 11% so far this year.

Elsewhere, Singapore Airlines’ shares dropped 5.1% after some profit taking. Rival, Malaysia Airlines’ shares rose 3.1% on Friday.

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Asia Pacific selected airlines daily share price movements (% change): 08-May-09