UAE’s only listed carrier says hedging strategy dragged down fourth quarter performance
February 15, 2015
Dubai: Air Arabia, the UAE’s only listed airline, reported on Sunday a record full year profit for 2014 but blamed its hedging strategy for dragging down fourth quarter results.
Annual profit was up 30 per cent to Dh566 million for the full year ending December 31, compared to Dh435 million in 2013.
Annual turnover was Dh3.7 billion, up 17 per cent on the previous year, which the airline said rose on the back of a 12 per cent increase in passengers carried. A total of 6.8 million passengers flew with Air Arabia in 2014
“Despite the regional and global economical and geopolitical challenges, we remain highly confident about the long-term prospects for our business,” Chairman Sheikh Abdullah Bin Mohammad Al Thani said in a statement.
But the airline’s net profits declined 28 per cent in the three months ending December 31 to Dh68 million for the three months ending December 31, 2014, compared to the Dh94 million it made in the same period a year earlier.
Fourth quarter net profit fell due to a “temporary down correction in the fuel hedge portfolio,” the airline said in a statement.
Global benchmark Brent crude lost nearly half its value in the second half of last year falling from $115 a barrel to finish the year below $60. In November, jet fuel prices were down 23.3 per cent in the Middle East and Africa compared to a year earlier, according the International Air Transport Association (IATA), an industry group.
“The benefit of lower fuel is not reaching airlines equally due to their hedge position. This will continue as airlines wade through their positions and see where fuel prices go, so the fuel price benefit will continue to be uneven,” said Will Horton, senior analyst at CAPA — Centre for Aviation, by email.
Air Arabia said it expected its fuel hedging strategy to “regain its benefits going forward.”
Air Arabia’s fourth quarter turnover was Dh924 million, up 14 per cent compared to the Dh811 million it posted for the same period a year earlier. Passenger traffic for the three months ending December 31 rose 8 per cent to 1.7 million passengers.
“We have begun this year with the aim of continuing our strategy to expand into new markets and increase our network coverage,” said Al Thani.
Air Arabia announced in January it had purchased 49 per cent of Jordan’s Petra Airlines which would be rebranded Air Arabia Jordan and soon operate from the airline’s latest hub at Queen Alia International Airport in Amman, Jordan. Its other hubs are in Sharjah and Ras Al Khaimah in the UAE and in Egypt and Morocco.
The airline’s board has proposed a dividend of Dh0.09 per share.
Air Arabia shares closed down 1.76 per cent to Dh1.67 on the Dubai Financial Market (DFM) on Sunday.