The Business Year

Adel Ali

UAE, DUBAI - Transport

Challenging the Heights

CEO, Air Arabia


Adel Ali helped to transform Arab aviation when he set up Air Arabia in 2003, opening the region up to low-cost carriers. In addition to being the Group CEO of Air Arabia, he is also the Chairman of Sharjah Information Systems Associates, Alpha Sharjah Catering, Alpha Aviation Academy, and Cozmo Travel. A board member of Sharjah Aviation Services, Adel also sits on the board of Air Arabia (Maroc), based in Casablanca’s Mohamed V International Airport, and Air Arabia (Egypt), based in Alexandria’s Burj al-Arab International Airport.

"I think the UAE has become a true transport hub purely as a result of its open-door policy."

How has the company grown since it was founded in 2003?

It has grown from 200,000 passengers to 5 million in just under 10 years. Naturally, with that, the number of aircraft and routes has grown too, as has the number of employees. Revenue has grown and profits have increased. It has been a total growth story.

What are the advantages of being publicly owned?

When you are publicly listed you are accountable, and are much more disciplined as a result. The benefit of going public is that it helps you to raise funds to expand the business. Once you raise the funds, though, there is quite a lot of responsibility to provide a return to those who invested in the business. From Air Arabia’s perspective, the IPO has been very good in terms of returns.

“I think the UAE has become a true transport hub purely as a result of its open-door policy.”

What challenges exist in being a low-cost carrier?

The airline industry is always going to be a challenge, and challenge brings opportunity. Challenges include things that are outside of our control, such as the cost of fuel and the weather. Other challenges exist when countries do not allow more inbound routes in order to protect their national carriers.

How does the UAE compare to countries like Egypt or Morocco as a transport hub?

I think the UAE has become a true transport hub purely as a result of its open-door policy. It also encourages competition. Therefore, any airline can come to the UAE. This has probably made the work for some UAE airlines a bit more difficult, but it has benefited the country, the people, the airport, and even the airlines in the long term. Morocco’s approach with Europe has been to sign an open-skies treaty, and that has been fantastic. It has grown the market tremendously. Egypt, on the other hand, does not allow low-cost airlines to operate in Cairo. As a result, in our opinion, the airport is underutilized.

You have won numerous CEO of the Year awards. Why do you keep getting these accolades and what makes your approach different?

Being the head of a team I tend to get the recognition, but the work is done by all the people around me. We have a fantastic group of people at the company, a lot of whom started the business with me—and we still enjoy it together. My simplicity and approach gives comfort to the people who work in the company, and they use their initiative to move the business forward.

Air Arabia is now flying to Basra. Are there any other regions that you have short-term plans to expand into?

We started flights in the middle of 2012 to Erbil and then into Basra, and we are hoping to soon be in Baghdad. In Pakistan of late we have increased our operations from seven flights to 21 flights a week. In 2012, we expanded into Russia, Ukraine, and Central Asia. I think we will continue progress on that front over 2013. We will also expand a bit more in Pakistan in 2013. We also hope to have further frequency and some expansion into Turkey, again a very developing market. We wish to expand more into India, but that is subject to a bilateral agreement between the two countries. Saudi Arabia has been great and continues to expand and has done very well. We would like to expand a bit more in Qatar, subject to the Qatari authorities granting us permission.

Air Arabia’s plans to expand into Jordan stalled in 2011. Will there be any progress in that country this year?

We had penciled in Jordan as a hub. Circumstances have changed. The economy hit the wall and then we had the Arab Spring, which moved into summer, winter, and beyond. The climate was really not ready for setting up a hub.

Investors are flocking to the country and shareholders are very happy. Air Arabia’s Q3 profits were up around 126% in 2012. How do you manage that demand to prevent it from being becoming overwhelming?

Everyone has to be realistic in life. I think this is one of the challenges with being publicly listed because you have to tell people what are you doing and how much are you making. In a private business you do not have to report those things. You can just bank it. It is great as a company to have been able to announce positive results since we started this business 10 years back. Every single year we have seen profits, though some years are better than others. In 2012 we are still waiting to announce the final result, but Q3 three was a fantastic quarter for us. This was achieved through a combination of reasons. We had a much higher seat factor, our yield per passenger was better, our fuel hedging hit at the right time, and we increased our ancillary revenue by almost 60% by introducing many new ancillary opportunities. We have to strive to improve the business—that is our job and the trust that our shareholders have put in us. We are all committed to that. However, one needs to put a cap on this. This business has its ups and downs. So far it has been up and we want to keep it up. However, we have to be realistic and acknowledge that it is not always going to be going up. So long as we are profitable, we will remain competitive.

What is your forecast for the airline industry in the UAE going into this year?

Fuel is a big factor. Fuel volatility is now part of any transport life, which by now we should have all gotten used to. We should expect sudden changes in fuel prices up or down. We have to be flexible enough to manage that. The Arab Spring has had, so far, a surprisingly positive impact because people continue to travel. I think that could be because the Middle East has never been a boring place. Therefore, maybe we are immune to the problem. It is unfortunate that there are some areas we cannot fly to, like Syria, for example. Syria is a very good market that we are not operating in. Egypt saw, last year, a drop due to the election and political developments. In the last few months we have seen positive improvements in Egypt and I think more stability will come to that area, which will be good. It is very difficult to predict. We are, as an airline, pretty happy that it has been a fantastic decade of growth.

© The Business Year – February 2013



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