Low cost carrier Air Arabia posted a 37 percent drop in fourth-quarter net profit, missing analyst forecasts, and the airline plans to cut its dividend amid rising competition and higher fuel prices.
Air Arabia earned a profit of AED73.2 million dirhams (USD$19.93 million) for the last quarter of 2010, down from AED115.68 million dirhams it reported during the same period in 2009.
Its net profit for 2010 was AED309.6 million dirhams, the company said in a statement on Monday. The fourth-quarter profit was calculated from the company's previous financial statements.
The airline's board proposed an annual dividend payout of eight per cent of capital, equivalent to 8 fils per share. The company paid dividend of 10 fils per share during the year-ago period.
A note from Credit Suisse warned that the airline could cut its 2010 dividend given weak first-half results and more margin pressures could be expected due to limited room for further cost savings.
The airline, set up in 2003 in Sharjah in the United Arab Emirates, is facing growing competition from local rivals including Kuwait's Jazeera Airways and Dubai-owned flydubai, as well as from fully fledged carriers such as Emirates.
Chairman Sheikh Abdullah Bin Mohammad Al Thani said he saw "significant growth opportunities in 2011 based on Air Arabia's ongoing expansion strategy."
The airline's new Jordan hub is expected to open in June this year. It has a hub in Morocco and launched operations in its third hub in Egypt last year.
The carrier announced the expected delivery of a total of six aircraft this year after receiving its first of 44 aircraft in October last year.
By 2016, following the delivery of 44 A320s, Air Arabia's total operating fleet will exceed 50 aircraft, more than doubling the size of its current fleet.