Air Arabia Rallies on Earnings, Expansion Outlook: Dubai Mover

Air Arabia PJSC rose to the highest level in nine months on bets full-year results at the Middle East’s biggest no-frills airline will beat estimates as it expands into new locations and benefits from lower fuel costs.

Shares of the company, whose third-quarter profit more than doubled, advanced 2.2 percent to 74.1 fils at the close in Dubai. The stock was the most traded on Dubai’s DFM General Index today by volume, trimming the measure’s decline to 0.1 percent. The company may post a 38 percent increase in 2012 profit to 370 million dirhams ($101 million), according to the mean estimate of seven analysts on Bloomberg.

“Air Arabia continues to demonstrate solid operational growth, accompanied by strong management ability,” said Tariq Qaqish, deputy head of asset management at Al Mal Capital. The broadening of flight destinations and fleet expansion amid lower costs “will help the company grow its topline and expand its net margins,” he said.

Air Arabia, which competes with Dubai state-owned FlyDubai, started flights to Basra, Iraq after earlier this year adding Erbil as well as Peshawar, Pakistan and Ufa, Russia to its list of destinations. The budget airline may open a hub in India, Chief Executive Officer Adel Ali said in Mumbai in October. The company also added aircraft to bases in Morocco and Egypt after it captured a rebound in demand for travel following last year’s so-called Arab Spring, Ali said in March.

Air Arabia’s shares have rallied 26 percent in 2012, compared with a gain of 19 percent for the benchmark stock index. The company trades at a price to earnings of 8.3 times, compared to 11.6 times for the DFM General Index.

Passenger traffic at Sharjah International Airport, Air Arabia hub, rose 21 percent in October, according to data on airport’s website. Crude has dropped 11 percent so far this year as Europe’s debt crisis worsened.

Seven analysts recommend investors buy the shares of Air Arabia, while four have a hold rating on the stock and one says sell, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE