With profitable quarters under its belt and two new airlines in the works, Air Arabia Group is aiming to emerge confidently from Covid-19 under Adel Ali’s leadership
While the Covid-19 pandemic tested to the limit Adel Ali’s “don’t panic” mantra when it comes to handling crises, the Air Arabia Group chief executive is navigating his business through the downturn with a degree of confidence about the recovery.
Speaking to FlightGlobal in November 2021, before the Omicron variant of Covid-19 had been identified, Ali said a calm head had been particularly important during the initial wave of the novel coronavirus, as fleets were grounded and governments put up barriers to travel.
“When you reflect back and see all the aeroplanes are parked on the ground and nothing is flying and you’ve got responsibilities for managing through it, it’s scary, but for me this was not the first world crisis,” he says.
“Previous crises haven’t been of the same size, but there have been past pandemics and people have gone through it and markets after that have grown. And I have no doubt that this market will grow too.”
That is why “don’t panic” is an important lesson from Covid-19 for airline leaders, Ali says, while the crisis has also shown him the importance of having “the right people” around you.
“In any crisis no CEO can manage all the challenges,” he states. “You need the right people to be able to do that.”
Ali is certainly an airline leader to listen to.
Air Arabia Group’s third-quarter 2021 results marked the fourth quarter in a row that the Sharjah-based business had been profitable on both an operating and net basis, at a time when much of the global industry was still facing swingeing losses.
At the same time, Ali had kept one eye on the post-crisis growth opportunities for the publicly owned group, with Air Arabia signing agreements to launch new low-cost carriers in Pakistan and Armenia, to complement those it operates in the UAE, Morocco and Egypt.
BIGGER AMBITIONS
“That’s always been our trick – to make sure wherever you want to go within the Arab world and the Indian subcontinent, you can jump on an Air Arabia aeroplane,” Ali says. “Of course, with the Pakistan and Armenia operations, that is about to get much bigger.”
The group was even involved in an airline launch as most of the world was reeling from the first wave of Covid-19 cases in July 2020: its Air Arabia Abu Dhabi joint-venture with Etihad Airways.
“It couldn’t have been a worse time but we were confident enough to say ‘it’s good long-term, let’s go’,” Ali recalls. “We’re pleased we did that because otherwise it would have taken much longer.
“Etihad feel they need the legacy business model to continue, representing Abu Dhabi and representing the capital, and they feel they also need a feeder for the tourism, for Abu Dhabi, and bringing and stimulating business that wasn’t there.”
And looking back on the crisis so far, Ali notes that despite all the challenges, there were positive by-products.
“If you can stop, re-look and start again, it’s a great thing, but you don’t usually get that opportunity”, he says.
“Despite all the negatives of Covid, it did offer the airlines that opportunity to re-examine their business, because there were times when nobody was flying.”
In Air Arabia’s case, “we re-examined everything we do”, Ali states.
The focus was on bringing “a lot of efficiency into the business”, which meant “looking at all cost areas and cleaning up the business”.
But to achieve profitability during the downturn, Ali says that Air Arabia needed to do more than review and address costs.
“That helped,” he says, but strong yields “because of scarcity of capacity” in Air Arabia’s markets have driven revenue and therefore profitability during the pandemic, when its airlines have been able to fly.
“You were not doing a network, you were just flying to specific countries that would allow you to fly,” he explains. “We have a business model that helps us to move the business from a hub to another hub very quickly based on supply and demand.
“For example, in Q3 [2021] and particularly in July and August, Morocco was fantastic because Europe was open to Morocco.”
At the same time, Air Arabia has benefited from a revenue source that was a lifeline for many carriers: the cargo boom.
“Air freight contributed much more than it had in the past, in terms of the rate you can get in the market,” Ali says.
“So it’s really a combination of those things [driving profitability], and I have to admit that fuel hedging policy has really helped us.”
HUB-AND-SPOKE STRENGTH
More fundamentally, Ali says it has become clear during the pandemic that the underlying fundamentals of the carrier’s strategy are well matched to likely post-Covid passenger expectations.
“We think our hub-and-spoke system that we’ve got in the different countries, Morocco, Egypt, [the UAE], three different airports, the one that we’re putting together in Pakistan, the one that we’re putting together in Armenia, it’s good diversity of business.
“That’s what the future is all about,” he insists. “People want to fly non-stop now, they want to probably not be too long sitting on an aeroplane, to their home country or their home city.
“Our business model has always been flying to as many airports as possible, using a single-aisle aeroplane and our future order suggests ‘do what you have done’, because it’s working.”
With Air Arabia’s various units at different stages of recovery, the near-term plan is to bring all of the airline’s current fleet back into service over the coming months. After that, the growth potential will eventually come from incoming aircraft.
Air Arabia ordered 120 A320-family jets at 2019’s Dubai air show, comprising 73 A320neos, 27 A321LRs and 20 A321XLRs. Ali says the group is sticking with the pre-Covid plan to start taking deliveries from 2024.
Some 40% of those jets are for “fleet replenishment”, he notes, while the rest will be for growth.
”In Sharjah we need probably organic growth, Abu Dhabi still has a long way to go [in terms of growth potential], Morocco needs a little bit of growth, Egypt is getting better so we will probably need to grow that, and then we’ve got two new airline start-ups [in Armenia and Pakistan], so we’ll see what that brings,” he states.
The A321LRs and A321XLRs will also give Air Arabia more opportunity “to expand to areas we couldn’t go” before.
Ali believes Air Arabia’s existing onboard product would not need adjusting for those longer routes, claiming that it already goes well beyond passenger expectations for a low-cost carrier.
“Our average sector is longer [than most low-cost carriers’],” he says. “So rather than packing an aircraft with seats, I take a penalty in terms of fuel during flights. I give people the comfort.
“From a seat and onboard product perspective [we offer something] better than any legacy airline economy cabin.”
Ali also cites Air Arabia’s ancillary business as “really good”.
“Those things work,” he says. “With the size of the network we have, that helps us develop as a business.”
PLANNING FOR SHOCKS
With lots of growth opportunities to look forward to at Air Arabia, Ali has nevertheless been in the business long enough to know that “when Covid is over, the industry surprises are not”.
“There is always going to be another one,” he says. “So you’ve got to be prepared. To plan and be ready to act. That for me is a big thing.”
But as the threat of Covid-19 subsides, Ali maintains an unshaken belief in Air Arabia’s strategic fundamentals. “For us, it’s been working for 18 years, so why change?” he asks.
“People have not had a chance to spend for two years. And they have a need to fly now. So it’s a matter of time before we see the markets return.”
