Airlines in the Arab world are such a burden on government resources that up to seven state-backed carriers have considered going private in recent years, claimed the CEO of Air Arabia, the region’s largest low-cost carrier.
“It's not a secret that most airlines in the Arab world are a burden - governments have to pump money into them to keep them alive,’’ said the no-frills carrier's CEO Adel Ali.
Ali highlighted that the US has had to bail out 23 airlines in the past 10 years - and called for the responsibility to be shifted to the private sector, through appropriate legislation.
“I'm aware of six or seven government airlines that have been thinking about going private in recent years,’’ he added. “Airlines are expensive things - in most places, you find that the government is spending a lot of money on them.’’
However, Ali said going into private hands is a “double-edged sword - it exposes you, but it brings a lot of discipline to the business… Once you have shareholders you need to be accountable…that’s what our focus is all about’’.
Despite the high oil prices, Air Arabia, the largest budget airline in the Middle East, which presently operates out of Sharjah, Morocco and Egypt, reported an 11 percent increase in first quarter profit, reaching AED49.3m (US$13.4m).
The carrier served 1.23m passengers in the first three months of the year or seven percent more than in the same period last year. The airline’s average seat load factor was 82 percent.
“The business seems to be good, forward bookings are good, we’re hitting the summer season, we’re expecting a good year,” Ali said when asked if he expects the same growth rate in the remaining three quarters of the year.
High oil prices have impacted the bottom line of airlines, with Emirates, the largest carrier in the world reporting a 72 percent decline in 2011 profits because soaring fuel prices accounted for nearly half of its costs.
The Sharjah-based Air Arabia, which competes with Kuwait’s Jazeera Airways and flydubai operates Airbus SAS A320 single-aisle planes, and has a fleet of 30 aircraft with 35 to be delivered through 2015-2016. Some 44 A320s have been ordered in total at a list price of US$3.6bn.
By Arabian Business