UAE Civil Aviation Day with Adel Ali, CEO of AirArabia on the Morning Majlis

Good morning to you, thank you.

Well, thank you. Back in the 1930s, I must tell you something that happened to me. The first time I came to Sharjah, when I was working for British Airways in 1987 or '88, I came to see my current chairman, who at the time was the chairman of civil aviation in Sharjah. And we came to see them because British Imperial Airways at the time was celebrating the 60th anniversary of Imperial Airways in the Gulf. And Sharjah was one of the key airports that back in the 30s the aircraft used to land in. So you just reminded me that I'll share that story with you.

UAE National Civil Aviation Day is a deserved one and I think it's the right thing to do. If we look at the civil aviation in the UAE in particular, we have achieved collectively as an aviation industry such milestones that much bigger countries have struggled to achieve. And it has been achieved at a very high standard, good quality, and commercially viable. Airlines are not just transporting people from point A to point B, but also serve as a great ambassador for a country, for an emirate. Air Arabia is a good ambassador in 130 airports around the world for Sharjah. Everybody knows that we are from Sharjah, that it's a good airline from Sharjah. Even people in places we don't fly to recognize that this is a Sharjah airline. But I think as a country, the Emirate of Sharjah, in the last two decades what we have achieved in terms of civil aviation, in terms of aviation business, has been phenomenal. And this is only the start. We should congratulate everybody in this industry collectively, whether it's airports, airlines, and all the other support services. Excellent achievement and a long way to go.

It is, inshallah, very good future ahead. Let me break it into the airport expansion, which is a fantastic thing to happen. But before that, let me touch on the results. This year particularly, post-pandemic, it's been a great recovery of business for all of us. You may recall that Air Arabia has been a profitable airline all the way through. The only year we did not achieve profitability was 2020, because we were not flying due to the pandemic. Otherwise, it's been profitable. Quarter three in 2023 has been an exceptional year for a number of reasons. The demand is exceeding the supply in the market, the yield has been holding, and as normality returns, we'll probably see a dip in yield across the industry, which is good for the customer. But the profitability for us is a combination of having the right network, the right seat factors on the aircraft, and it has proven itself over the last 20 years that we have been operating. By the way, on the 28th of October we will be celebrating our 20th anniversary as an airline. It's been a good business for us, and the contribution of Q3 particularly was excellent. Normally Q3 is a quieter month, but this year has been great business due to movement in the country, tourism has increased, and local business has been going out a lot. Our policy on fuel hedging has worked extremely well for us over the years, and this year particularly has done well. The overall efficiency of our business model is all about efficiency, making sure the cost is well managed while revenues are maximized, and that creates the profitability in the business.

A new destination, and normally when you launch any destination it takes up to two to three years before you see bottom line profitability. But what it is, is an expansion of the network that contributes to the overall bottom line of the business in terms of how you utilize your aircraft and logistics. Because of the technology and the ability of the aircraft that we use to go further now with our A321neo airplanes, we have expanded into three new routes this year. Mainly they were Milan as you mentioned, and in Southeast Asia we have introduced Kuala Lumpur in Malaysia and Bangkok in Thailand. All three have been performing extremely well, we're very satisfied with. What we've done at the moment is see how the market accepts it, and we're very happy with the reaction. Because we're going to get many more of this new version of aircraft called the A321XLR, which will fly up to nine hours. Once that comes, our aim is to expand the business into more European cities, more Southeast Asia, as well as some longer routes in Africa. So overall, it has been good.

The aircraft is not going to be ready because it's a new-built aircraft until about late 2024 or 2025. But once it comes, most of the places in Europe we will be going to, including of course what you always want to connect with Sharjah, which is London. I think China is another good market that we should be serving, and so on. Those are the things I can quote now because for sure we will be in those airports.

You know, an airline cannot survive without an airport, and an airport is a big wasted piece of land without an airline. So we go hand in hand, and cooperation over the last 20 years has been just outstanding. Everybody has been extremely supportive. Capacity is constrained at Sharjah Airport, and that's a good thing for any airport. When your capacity is constrained, it means you're doing well and you want to expand. Hence the 2.5 billion dirham expansion plan that the government has approved. A good thing in Sharjah, in my 20 years' experience, what I have seen is the vision of His Highness Dr. Sheikh Sultan has always been that where there is a need to invest, that investment comes in. He inaugurated Air Arabia on the 28th of October 2003, and since then he's been making sure that the airline grows on its own, is financially viable, and that we do the right things and the right principles. He always ensures that safety, security, and level of service represent Sharjah properly. The same is happening at the airport. With the approval of the capital for the expansion, I think the expansion is overdue. The sooner it happens, the better. Unfortunately, because of the pandemic, things slipped a little bit. But I know the director general, the chairman of the airport authority, and the chairman of the Sharjah Civil Aviation Department are all working hand in hand to make sure the terminals and expansion are ready as soon as possible. The good thing we have in Sharjah is the support is very friendly, the airport is not vast, and therefore the customer likes it. From London, 15 minutes in your car, and you don't need to be at the airport except an hour before departure. There's a lot of good things about this airport, and the catchment area is fantastic in terms of geographical position. I can't wait to see this beautiful expansion taking place. That would fulfill our needs for the 120 aircraft we have on order between now and 2030. I think the airport and our expansion will complement each other extremely well.

It's twofold. We obviously created this in Sharjah 20 years back, and Air Arabia has made sure they've built all the infrastructure in Sharjah. It is huge infrastructure being built over the last 20 years, with various technical abilities, operational capabilities, technology capabilities, catering specialties, and management expertise all based here in Sharjah to serve the number of hubs that we have. I'll come to Pakistan in a minute. We started about 12 years ago a hub in Morocco. Air Arabia Morocco operates to about 40 airports in Europe, almost every key city in France, Spain, Italy, Switzerland, and England including the UK. At a similar time we opened another hub in Egypt called Air Arabia Egypt. From there we operate into parts of Africa, the Middle East, and Europe. Lately, during the pandemic, we set up a hub in Abu Dhabi, a joint venture with ADQ, and we operate to about 45 airports from Abu Dhabi. Of course, Ras Al Khaimah has been one of our key airports for the last seven or eight years, and that partnership has been going very well. Lately we established Fly Jinnah in Pakistan, and again we've got a fantastic partner there. We saw Pakistan with over 200 million population as a great place for connectivity. The law in Pakistan requires one year of domestic operation before international routes, which we will be completing by November. Once that is complete, we'll be applying for international routes, and very much so we will be expanding internationally.

That's a very interesting and good topic to talk about. The pandemic stopped people traveling; people did not stop wanting to travel. And what was more interesting is as soon as it opened up, we saw the demand just hitting the roof, not just in the UAE but globally. I think there was a research done by McKinsey about a year ago which clearly indicates that during the pandemic period, consumers generally shifted their mindset from buying products to enjoying life. And a big part of enjoying life is traveling and going on holiday. To that testimony, we have seen continuous growth as soon as airports and people were able to travel. The UAE was unique in this because the UAE successfully managed the pandemic. In hindsight, when you look back, we were all frustrated at the time, but the result of everything that happened made sure that we as a country were the first to open our doors and have the ability to bring air travel and business back to normality. Because of that achievement the government put in place, we saw tourists and visitors coming in very quickly, and people from the country moving out to travel. As of today, I think it's reasonable to claim that when you travel, you've forgotten there was something called a pandemic. People are traveling normally, airports are full globally and locally, and everybody's flying. This is why the demand is still exceeding the supply in the marketplace.

I just want to take a minute to get into this because it's very interesting. It's twofold. One is fuel oil price itself, and I think if we just reflect back over the last 20 or 30 years, the oil price has never been stable. It's a commodity that continues going up and down. Those of us in the transport business, not just air transport but any form of transport business, by now should have recognized that this is normal and built contingency to make sure it is incorporated into the normal business model. For Air Arabia Group, what we do is apply what we call fuel hedging, so we hedge ahead two to three years before when the prices are right, and that helps us to manage our cost and better predict productivity and planning. Having said that, I think we have to be realistic today. It is cheaper to fly an hour and a half on an airplane than taking a taxi from Sharjah to Abu Dhabi. Flying has not become expensive. What makes it expensive unfortunately is the global taxation put in place, where a lot of airports around the world and the region add a lot of taxes onto passengers, which does not come to the airline, but the airlines are the collectors passing it to various authorities. That's what makes air travel a little expensive. The ticket itself, I think, has never been cheaper than in recent history. I recall people used to travel from the UAE to London for 4,000 dirhams return in economy. Nowadays you can get fares as cheap as 2,500, and I'm talking about 20 years of cost increases and everything else in life. Fuel will be with us, it will go up and down, and we just have to manage it best we can. Yes, if it goes a little too high, then airlines will have no option, exactly the same as what happens when we go to the petrol station. At the beginning of each month they say fuel prices have gone up or come down. With the airline industry, if it exceeds 100 dollars, you may find fuel surcharges added more into the business.

That's fantastic. We've had a great experience, and we've helped a lot of people. Twenty years ago, many of them had never seen an airplane. Now we've made it live for them, much easier to go and visit their families, relatives, and travel and enjoy life at a very affordable price. What is important is this would not have happened at all if it was not for the total support and understanding of the government in Sharjah, the support from all the authorities. You can't run an airline or move people without the support of all the authorities, whether it's the Civil Aviation Department in Sharjah, the airport authorities, immigration, customs, securities, everybody else involved. The list is too long to thank, but everybody should be recognized. I would be remiss if I did not say a big thank you to the UAE Federal General Civil Aviation Authority. It's their day and we should congratulate them on what they have done and achieved. The GCAA has made sure that not only the industry grew significantly for the whole country, but also that it is at a safe and security standard equivalent to anywhere else in the world, at the top. So for that, one has to say thank you to them.