Air Arabia can live with US$100 oil, prefers below -CEO
US$85 to US$95 a barrel of oil is "good" for the aviation industry, Adel Ali, CEO of Air Arabia, the largest budget airline in the Middle East, said in an interview at the Arabian Business Forum in Dubai today.
"Plus or minus US$100 is reasonable for the seller and the buyer," Ali said, adding "let’s be realistic, oil will not go to the US$70s and US$60s."
High oil prices have hit the bottom line of airlines with Emirates, the largest airline in the world, reporting a 72 percent decline in 2011 profits because soaring fuel prices accounted for nearly half of its costs.
Brent crude for July delivery reached US$106.86 per barrel by 1005 GMT today, after hitting a high of US$108.04 in the previous session, according to Reuters.
Political instability and higher fuel surcharge prompted Air Arabia to call off establishing a fourth hub in Jordan last year.
Air Arabia, which presently operates out Sharjah, Morocco and Egypt, competes with Kuwait’s Jazeera Airways and flydubai. It reported a 11 percent increase in first quarter profit which reached AED49.3m (US$13.4m) and served 1.23m passengers in the 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.
Sharjah-based Air Arabia, 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.
"In the next 12 to 15 months we will have to look and review our fleet planning," Ali said when asked if the airline plans to order additional planes as it expands its network, adding a possible fourth hub to its operations as the global economy picks up and regional stability sets in.