DUBAI, United Arab Emirates – Budget airline Air Arabia posted a 37% drop in Q4 net profit, missing analyst forecasts, and the airline plans to cut its dividend amid rising competition and higher fuel prices.
Reuters reports that Air Arabia earned a profit of 73.2 million dirhams ($19.93 million) for the last quarter of 2010, Reuters calculated, down from 115.68 million dirhams it reported during the same period in 2009.
Its net profit for 2010 was 309.6 million dirhams, the company said in a statement on Monday. Reuters calculated the fourth-quarter profit from the company’s previous financial statements.
Five analysts forecasted an average profit of 97.42 million in a Reuters survey in January.
The airline’s board proposed an annual dividend payout of eight per cent of capital, equivalent to 8 fils per share. The company paid dividend of 10 fils per share during the year-ago period.
A note from Credit Suisse warned that the airline could cut its 2010 dividend given weak first-half results and more margin pressures could be expected due to limited room for further cost savings. The airline, set up in 2003 in Sharjah in the United Arab Emirates, is facing growing competition from local rivals including Kuwait’s Jazeera Airways and Dubai-owned flydubai, as well as from fully fledged carriers such as Emirates.
Chairman Sheikh Abdullah Bin Mohammad Al Thani said he saw “significant growth opportunities in 2011 based on Air Arabia’s ongoing expansion strategy.”
The airline’s new Jordan hub is expected to open in June this year. It has a hub in Morocco and launched operations in its third hub in Egypt last year.
According to Reuters, the carrier announced the expected delivery of a total of six aircraft this year after receiving its first of the 44 aircraft in October last year.
By 2016, following the delivery of 44 A320 aircraft, Air Arabia’s total operating fleet will exceed 50 aircraft, more than doubling the size of its current fleet.
Shares of Air Arabia ended 1.9 percent higher on the Dubai bourse .DFMGI before the results were announced.