Gaining Altitude

Air Arabia was the first and is now the largest low-cost airline in the MENA region. It currently operates a fleet of 18 aircraft and flies to 42 destinations in 21 countries. With a load factor of 86% and a daily airtime per aircraft of 14.5 hours in the first nine months of 2008, Air Arabia is one of the most efficient airlines both regionally and worldwide.

Between 2004 and 2007, the Company achieved a 61% CAGR in RPK. We believe Air Arabia’s core strengths such as market leadership and strong management remain largely intact. In addition, the Company possesses a strong balance sheet with no debt and more than AED 2bn in cash, a particular advantage given the current tight credit conditions. In our opinion, Air Arabia is well positioned to benefit from continuing growth in the Middle East budget airline sector. In addition, we regard the downside risks to the Company as limited. Therefore, we initiate coverage with a Buy rating.

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