Air Arabia to find lift on Qatar Airways' troubles

The growing problems Qatar Airways is having look set to give Air Arabia a welcome boost.

While the UAE's only listed carrier has tumbled 20 per cent in 2017, things look more favourable in the second half of the year, analysts say. The company will attract more travellers on routes that overlap with Qatar Airways, which has been banned from flying into or over countries including Saudi Arabia and the UAE after they severed commercial ties with the country last month.

The “Qatar Airways situation will help increase passenger traffic and load factors,” said Amine Wafy, an equities analyst at Renaissance Capital in Dubai. Air Arabia operates at near-full capacity into Saudi Arabia and the company could add more planes than anticipated for those routes, helping to offset the lost capacity from flying into Qatari market, he said.

While the Sharjah-based company specialises in short flights and Qatar Airways is a long-haul wide-bodies operator, there is some route duplication. Air Arabia serves 13 cities in Saudi Arabia, including key destinations Jeddah and Dammam, that are among the top 10 busiest routes for its Qatari peer, according to the consultancy firm Frost & Sullivan. Since the ban came into effect on June 5, the bigger carrier has had to cancel some 880 flights into the kingdom, data from research firm OAG shows.

While the airline is forecast to report a 25 per cent slide in second-quarter profit from the year-earlier period when it releases results next month, Air Arabia’s 12-month average price target of Dh1.20 implies a 13 per cent upside from Sunday’s close.

“Air Arabia’s fleet is able to sustain operations to destinations that are not more than five flight hours away at the moment,” said Mark Martin, the head of Martin Consulting. “That implies that its network and revenue are far more resilient since its core income comes from the blue-collar and white-collar labor traveller market.”

Reuters