How Air Arabia CEO Adel Ali maintained an unbroken record of profitability in 2011, written by Robeel Haq
Air Arabia CEO Adel Ali seems to have a penchant for the number six. Last year, for instance, the Sharjah-based low cost carrier received six Airbus A320 aircraft, while passenger services were also launched to six new destinations. This year, again, six Airbus A320s will be introduced into the airline’s fast-expanding fleet, the first of which has already been delivered. “What can I say, we like the number six,” the executive laughs when questioned about the number’s reoccurrence. “Did I mention, our passenger traffic increased by six percent last year? Perhaps it’s a lucky number!”
According to Chinese culture, Ali might actually have a point, as the number six is considered auspicious and often linked to good business. This could explain why, at a time when several Middle Eastern airlines are counting their losses from a dismal 2011, Air Arabia’s turnover and passenger volumes have continued to skyrocket. “With recent challenges such as political unrest in the region, soaring fuel prices and weak economic conditions in parts of the west, it’s been a turbulent year for the airline industry as a whole,” reflects the Bahraini national. “However, while there has been some impact on our operations, we continued to outperform the market. Air Arabia’s annual turnover was a record US$653.4 million last year, around 16 percent more than 2010 levels, and we served 4.7 million passengers, which is our highest number to date.”
Such accomplishments have been credited to a “robust business model, a highly-focused management team and excellent cost controls” by Ali, who was selected to head Air Arabia in 2003, following one-and-a-half years at Gulf Air and around two decades at British Airways. His appointment was more than justified when Air Arabia reached breakeven after its first year of operations, with continued profitability ever since. However, after scaling an impressive peak of $138 million in 2008, net profits have been spiralling downwards on a gradual basis, dropping to $124 million in 2009, $84.3 million in 2010, and $74.6 million last year. Ali seems confident that the profitable streak will continue uninterrupted for the airline, which is listed on the Dubai Financial Market, although he admits it’s “a bit too early” to make accurate predictions for this year. “Many of the challenges from 2011 are still clouding the industry, but Air Arabia’s performance in the initial months of this year has been very encouraging and we are aiming for a good year, not only from our Sharjah base, but the additional hubs we opened in Morocco and Egypt too.”
It seems likely the low cost carrier will continue its push into new markets, following the success of last year’s service launches to Moscow and Yekaterinburg in Russia, Kharkiv and Donetsk in Ukraine, and Gassim and Yanbu in Saudi Arabia. Non-stop services were also introduced from its Alexandria hub to Riyadh and Dammam in Saudi Arabia, as well as the Italian city of Milan. “We are constantly exploring opportunities for our route network and have a long wish-list of destinations that we would like to serve. These are prioritised based on a variety of factors, such as their ability to complement our existing operations, their likely contribution to our bottom line, and their long-term growth potential,” states Ali. “Back in 2004, for instance, we were heavily focused on India, because it was a big market with a large population and fast-growing economy. As a result, we spread our wings across the subcontinent, which now accounts for around 35 percent of our total passenger numbers. Today, we feel the same way about Russia and the Commonwealth of Independent States (CIS), which is a huge market with residents that are extremely comfortable to visit this part of the world,” he continues, adding that individual breakeven targets are often assigned to new routes, although Air Arabia’s financial expectations are never short-term.