Air Arabia sees third hub 'in weeks'

Sharjah, August 9, 2009

UAE's Air Arabia, the Middle East's largest low-cost carrier, will announce a third hub in weeks and expects full-year profit to be positive despite excess capacity hitting yields in the second quarter.

Group chief executive Adel Ali told Reuters in an interview on Sunday that the next three to six months would remain difficult for the industry, but was confident Air Arabia would be in "good shape" in 2009 and beyond.

The airline on Saturday posted a 10 percent rise in second-quarter net profit to 90 million dirhams ($24.50 million), missing analysts' forecasts.

"We are pleased with the results, but market conditions continue to offer excess capacity and reflects a dilution of the yield,"  Ali told Reuters.

Ali declined to give a profit outlook for the third quarter or full year, but said hedging, lower unit costs and maximising seat factor would help it achieve positive results.

In the second quarter, the airline launched a joint venture in Morocco, flying from its Casablanca hub and has said it planned to set up a new hub between its base at Sharjah, UAE and North Africa.

"We are fairly close... it should be a matter of weeks," Ali said.

Air Arabia, formed in 2003, has a fleet of 20 A320 aircraft  and has placed an order for 44 A320s from Airbus, a unit of EADS. Ali said the airline could have as many as 100 planes by 2015 depending on how the airline's business evolved over the coming years.

Forecasts of four analysts for Air Arabia's second-quarter profit ranged from 100 million dirhams to 151 million dirhams in a Reuters survey in July. -Reuters

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