Air Arabia Plans $450 Million in Loans to Finance Planes

Air Arabia PJSC, the Middle East’s biggest budget airline, said it plans to raise $400 million to $450 million in bank loans to finance aircraft purchases.

“We will be getting deliveries till the end of 2015,” Chief Executive Officer Adel Ali said today in an interview in Dubai. “After that, we will need airplanes to expand and we will need replacement airplanes for the ones that have been in service for three years.”

The carrier, which will receive 10 planes next year as it adds destinations, will decide in the next 18 months on its next aircraft order, including which models, Ali said.

Passenger traffic through Air Arabia’s main hub at Sharjah, United Arab Emirates, rose 13 percent last year as the nation’s economy picked up. Air Arabia will start its 85th route, linking Sharjah with Abha, Saudi Arabia, on May 22, Ali said. The carrier added nine destinations last year, in countries including Iraq and Russia, from the base.

Air Arabia has already raised $150 million in loans that will be spent this year, Ali said. The carrier normally borrows from banks in Japan, the Middle East and Europe, he said, without identifying the lenders.

“At present, the company is liquid, and finding money through banks is available,” so the airline doesn’t need to go to the bond market, Ali said. “We have secured our requirements for this year and for next year, we don’t have a concern about finding funds for our expansion and delivery of aircrafts in the next three years. We are well covered.”

Air Arabia’s net income rose 56 percent to 419.5 million dirhams ($114 million) in 2012, beating the 404 million-dirham average estimate of eight estimates compiled by Bloomberg. The stock has gained 25 percent this year, lagging behind the 32 percent gain for the Dubai Financial Market General Index.

The stock has been “underperforming, so we are very happy to see it getting back to normality,” Ali said. “It still should improve more.”