Air Arabia eyes strong growth at Morocco unit

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Air Arabia eyes strong growth at Morocco unit

CASABLANCA - Budget airline Air Arabia wants its Moroccan start-up to grow to the same size as the parent company within five years, running a fleet of up to two dozen planes, its chief executive said.

By (Reuters)

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Published: Wed 15 Jul 2009, 4:40 PM

Last updated: Thu 2 Apr 2015, 7:36 AM

The Dubai-listed carrier, the Gulf Arab region’s largest low-cost airline by market value, began flying from its Casablanca hub seven weeks ago. Despite the recessionary climate in Europe, its main target market, it plans to expand by three to four aircraft per year as it adds new destinations.

“I am hoping in five years to have 20 to 25 planes, subject to the market progressing,” Air Arabia CEO Adel Ali told Reuters in an interview.

The airline, whose main competitors are state-owned flag carrier Royal Air Maroc and Jet4You, a low-cost airline owned by Germany’s TUI AG, is offering nine destinations in Europe. It also plans services to Turkey and Tunis and Alexandria, Ali said.

“Our vision is that this company will be growing to be as big as the parent company... The parent company obviously will grow too but we expect this (Morocco affiliate) to be a solid, big company standing on its own,” he said.

Moroccan shareholders own 51 percent of Air Arabia (Maroc), including family-owned holding company Holmarcom which also owns Moroccan carrier Regional Air Lines.

The remaining 49 percent is held by listed Air Arabia and a Bahraini bank.

Morocco in Demand

Air Arabia (Maroc) will help meet growing demand for travel to Morocco — the government expects to exceed last year’s record 8 million visitors in 2009 and is aiming for almost 10 million tourists in 2010.

As Morocco’s middle class grows, domestic demand for foreign travel is also seen on the rise.

The air transport sector suffered a blow in 2008 first from rising fuel costs then from the global financial crisis, causing a downturn that low-cost carriers have in many cases weathered better than scheduled airlines by competing more effectively on price.

“The world is going through a recession ... and the (H1N1) flu is not helping, so circumstances are not as easy as we would have hoped,” said Ali. “Despite all that, we ended June with a 60 percent seat (load) factor.”

He said a seat factor above 80 percent — filling eight or more of every 10 seats — for Air Arabia Maroc would be “good”.

Profit Outlook

He said he expected parent company Air Arabia to achieve “good” profitability this year, helped by hedging and lower unit costs. Net profit grew 32 percent in the first quarter.

“The industry is heading for a $8-9 billion loss, but we are still aiming for a good profitable year,” Ali said.

He said hedging against volatile fuel costs had locked in a price in the upper fifties in terms of U.S. dollars per barrel of oil.

Asked whether the parent company’s shareholders might ask for a bigger dividend this year, he said: “Our objective is, yes, for the result to be better than last year. The reality is we’re going to have to wait and see... It is really an unknown year.”

Air Arabia was also working to set up a new hub mid-way between Casablanca and its base at Sharjah in the UAE, said Ali, adding: “I’ll leave you to work out where that might be”.



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