Air Arabia Blames Fuel Hedging As Q4 Profit Falls 30%

Air Arabia, the United Arab Emirates’ only listed airline, blamed fuel hedging as it reported a 30 per cent fall in fourth-quarter net profit on Sunday.

The Sharjah-based carrier made a net profit of Dhs64.6 million ($17.59 million) in the three months to Dec. 31, down from Dhs91.8 million in the same period a year earlier, Reuters calculated based on the company’s financial statements.

Three analysts polled by Reuters on average forecast Air Arabia would make a quarterly profit of Dhs96.4 million.

The quarterly profit drop “was mainly due to a temporary downward correction in the fuel hedge portfolio, which will regain its benefits going forward”, the company said in a bourse statement.

Brent crude fell 39 per cent in the fourth quarter and 16 per cent in the three months before that. Airlines which hedged against oil price fluctuations are likely to have paid more for fuel than the market price in the latter part of 2014 due to the surprise and sustained drop in crude.

The airline’s fourth-quarter turnover was Dhs924 million, up 14 per cent year-on-year. Quarterly passenger traffic rose 8 percent over the same period to 1.7 million.

Annual profit was Dhs552.9 million, up from Dhs420.7 million in 2013.

Turnover rose 17 per cent over the same period to Dhs3.7 billion as passenger numbers grew 12 per cent to Dhs6.8 million.

“The year 2015 continues to witness political uncertainty in some parts of the region and with the current fluctuating fuel prices, the pressure on the global economies is increasing,” Air Arabia Chairman Sheikh Abdullah Bin Mohammad Al Thani said in the statement.

“We have begun this year with the aim of continuing our strategy to expand into new markets and increase our network coverage.”

Air Arabia’s directors have proposed a dividend of Dhs0.09 per share.

The carrier in January said it bought a 49-per cent stake in Jordan’s Petro Airlines, which will be rebranded as Air Arabia Jordan and begin operations in the first quarter.