Air Arabia expects to repeat strong 2022 passenger growth performance this year

Budget airline Air Arabia, which reported a record profit and doubled the number of passengers it carried last year, expects to repeat its passenger growth performance this year, driven by pent-up demand and the easing of travel restrictions, its group chief executive said.

Speaking on the sidelines of the Arab Aviation Summit in Ras Al Khaimah on Wednesday, Adel Ali told The National: “I think we should be able to repeat it. It's the third month in the year … and it is extremely difficult to predict how the [year will] pan out … [but] the near future looks promising.”

The first two and a half months of 2023 have been “reasonable” and “we have to wait for the summer to come, which is always a good thing”, he said.

After a strong 2022 for the global aviation industry, 2023 is likely to be a better one on the whole, although challenges still plague airlines amid geopolitical issues and concerns over an economic slowdown.

“The industry is recovering from supply chain [problems] and the pent-up demand and life that stopped for two years, so there is that element that we are optimistic about”, Mr Ali said.

“At the same time the world is also faced by the geopolitical issues, the inflation issue, and [a potential] financial recession that we have been hearing about from time to time. However, [with] demand, the redevelopment of the business and the massive projects that are going on in Saudi Arabia and the UAE, I’m optimistic about the region we live in”.

Sharjah-based Air Arabia, the UAE's only publicly-listed airline, posted a record full-year profit in 2022 as the number of passengers it carried exceeded pre-pandemic levels amid strong air travel demand.

The airline reported net profit of Dh1.2 billion ($327 million), up 70 per cent from Dh720 million in 2021, as its revenue for the period rose 65 per cent on the year to Dh5.2 billion.

The no-frills airline nearly doubled passenger numbers to 12.8 million, from 6.8 million in 2021 and topped the 12 million flown in 2019, before the pandemic.

Demand for air travel is rebounding as people take advantage of the freedom to travel after Covid-19 lockdowns.

However, higher oil prices, increasing inflation and supply chain delays are posing challenges to the global aviation industry's recovery as airlines race to step up operations and keep pace with demand.

Oil prices have been fluctuating and will continue to be volatile going forwards, but the industry is maturing and dealing with it through mechanisms such as fuel hedging, Mr Ali said.

The current level of oil prices is “good” for the industry, he said.

Brent, the benchmark for two thirds of the world’s oil, was trading at $76.33 a barrel at 3.45pm UAE time on Wednesday. West Texas Intermediate, the gauge that tracks US crude, was at $70.22 a barrel.

“Of course nobody wants … a $100 [per barrel] oil price. It is expensive for the airlines. But I think we have to accept and live with it in this new world,” he said.

“At the moment the yields are good and the oil prices going up $80 to $90 [per barrel], I think it's good for everybody.”

Air Arabia operates seven hubs in the UAE, Morocco, Egypt, Armenia and Pakistan. Last year, it added 24 new routes and took delivery of 10 new aircraft, ending the year with a fleet of 68 Airbus A320 and A321 narrow-bodies that operate on more than 190 routes in the Middle East, Africa, Asia and Europe.

The airline, which was the region’s first budget airline, is facing increasing competition.

Earlier this month, Kuwait's Jazeera Airways said it is starting a low-cost airline in Saudi Arabia with its partners in the kingdom.

The airline will be based at the King Fahd International Airport in Dammam and is being established in line with Saudi Arabia’s Vision 2030 economic transformation programme, which seeks to expand the tourism and aviation sectors.

Mr Ali said growth in competition is good for the consumer and the aviation market.

“As one market grows, it grows for everybody. I hope that we will get our share as well as everybody else”, he said.