Market dynamics suggest better 3Q11

• Good 2Q11 revenue growth (+22% YoY) on stronger yields
• Yields should remain firm into 2H11
• Passenger numbers in line, load factor better than expected
• Cost/passenger up sharply YoY on higher fuel costs
• 2Q11 net earnings flat YoY; we expect 4.9% growth for full year
• Maintain both our TP at AED1.00 and our BUY recommendation

2Q11 revenue recovery on stronger yields. Yields improved significantly (+16.2% YoY, +19.6% QoQ), beating our forecast by 4% and resulting in a revenue of AED592m (+22% YoY, +15.4% QoQ), 3% above our estimate of AED575m. Average ticket price was up c. 15% YoY, owing to a fuel surcharge (imposed from April) and firmer underlying pricing due to regional turmoil boosting UAE traffic (the emirates being untroubled by the unrest). Management also said that customers flying within the Middle East were making more last-minute bookings, thus keeping travel plans flexible, but paying higher ticket prices for the privilege.


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