Air Arabia Falls Most in 2 Weeks as Gulf Shares Fall

By Shaji Mathew

Nov. 9 (Bloomberg) -- Air Arabia PJSC, the low-cost carrier that posted a 30 percent increase in third-quarter profit, declined the most in two weeks in Dubai trading after falling oil prices pushed Dubai shares to their lowest since February 2005.

``The fall in Air Arabia share price could be attributed to the general market trend as the company's third-quarter net income was impressive,'' Kareem Murad, vice president of research at Shuaa Capital PSC, said today by phone from Dubai.

Air Arabia declined 5.1 percent, the most since Oct. 27, to close at 1.11 dirhams. The stock has lost 44 percent this year. The Dubai Financial Market General Index dropped 5.9 percent to 2631.46.

Third-quarter net income advanced to 214 million dirhams ($58.3 million) from 165 million dirhams a year earlier, the Sharjah-based airline said yesterday. Passenger numbers increased 34 percent to 978,794, while revenue jumped 69 percent to 625 million dirhams.

Robust economic growth in the U.A.E., the second-biggest Arab economy, and a rise in tourism are boosting air travel demand and helping airlines expand. Air Arabia said this month it plans to start operations from its second hub in Morocco early next year. Air Arabia Maroc will use the Casablanca base to fly to destinations in Europe, the Middle East and Africa.

``Air Arabia is expected to benefit from the decline in oil prices and the rise in passenger numbers in its main markets in the Indian subcontinent and the Middle East,'' Murad said. ``There is also a huge under-penetrated market in the Gulf Cooperation Council countries for low-cost carriers.''

Crude in New York has dropped 59 percent from the record $147.27 a barrel reached on July 11 on signs that the contracting U.S. economy is cutting fuel use in the biggest energy-consuming country.

To contact the reporter on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net