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Dubai: Air Arabia profits will rise by 123 per cent this year from operating new routes and interest income earned though its initial public offering, according to research by Shuaa Capital.
The private equity firm forecasts that the Sharjah-based airline will increase profits from Dh101 million in 2006 to Dh226 million this year.
Shuaa is also the underwriter for the Air Arabia IPO on March 18 on Dubai Financial Market.
Air Arabia will attempt to raise Dh2.56 billion to finance its fleet expansion up to 34 new planes by 2015, and might also establish a second hub for the no-frills airline. Created in 2003, Air Arabia became profitable in 2005.
Interest income earned from the cash infusion is the primary reason for the jump in profits this year, said Kareem Murad, an aviation analyst at Shuaa.
Murad said the market for low-cost carriers was heavily underpenetrated in the region.
This has left plenty of room for Air Arabia to prosper despite new competition such as Jazeera Airways, which established a second hub in Dubai recently.
"The penetration rate is almost zero, so there is definitely room for players to come in," he told Gulf News.
In the forecast, revenues are slated to grow at a less feverish but nonetheless robust pace, rising 37 per cent from Dh749 million in 2006 to Dh1.03 billion this year.
Air Arabia has prospered through the UAE's close proximity to Russia, Eastern Europe and India, considered major drivers to the region's aviation industry.
Airbus predicts Middle East passenger traffic to grow at an annual rate of 7.1 per cent through 2015, compared to a global average of 5.3 per cent.
The five-year Shuaa forecast said that the Air Arabia faces threats from new competitors, political instability in the region and a potentially slow pace of liberalization of the aviation sector.
However Air Arabia, one of the first no-frills carriers in the region, will continue to grow rapidly, reaching revenues of 2.46 billion and net profits of Dh369 million in 2011, the report said.
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