may 2008 - 1 - investor presentation may 2008 air arabia pjsc
TRANSCRIPT
May 2008 - 1 -
Investor PresentationMay 2008
Air Arabia PJSC
May 2008 - 2 -
Disclaimer
Information contained in this presentation is subject to change without
notice, its accuracy is not guaranteed and it may not contain all material
information concerning the company. Neither we nor our advisors make
any representation regarding, and assumes no responsibility or liability
for, the accuracy or completeness of, or any errors or omissions in, any
information contained herein.
In addition, the information contains projections and forward-looking
statements that reflect the company’s current views with respect to future
events and financial performance. These views are based on current
assumptions which are subject to various risks and which may change over
time. No assurance can be given that future events will occur, that
projections will be achieved, or that the company’s assumptions are
correct. Actual results may differ materially from those projected.
This presentation is strictly not to be distributed without the explicit
consent of
Company management under any circumstance.
May 2008 - 3 -
Air Arabia at a Glance
Investment Highlights
Financial Highlights
Strategy and Outlook
Agenda
- 4 -May 2008
Highlights
A national carrier of the UAE… Established in 2003 by the Government of Sharjah
First and largest low-cost airline in the MENA region
5.03 billion RPK(1)
2.5x the number of passengers as its closest LCC rival(1)
Current fleet of 11 leased Airbus 320s
Network covering a total population of 1.7 billion, 37 destinations in 21 countries within the Subcontinent, MENA region and Central Asia
Broke even within the first full year of operations
Awarded “best low cost carrier in the Middle East” by Skytrax
Adel Ali, CEO was awarded the CEO of the year 2007 by Aviation Business Magazine
Started operations from second Hub in Nepal in Jan 08
(1)For Year Ending 31 December, 2007
Route Network – as of December 2007
- 5 -May 2008
Passenger and Aircraft Growth
Total Passengers and Load Factor Geographic Distribution
Fleet SizeNumber of Destinations
5
15
23
32
37 38
0
5
10
15
20
25
30
35
40
2003 2004 2005 2006 2007 08 Q1
3
5
8
11
14
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007 08 Q1
547
1,133
1,763
2,700
757
79%68%
80%86% 85%
-
500
1,000
1,500
2,000
2,500
3,000
2004 2005 2006 2007 Q1 2008
Pass
enge
rs ('
000s
)
0%
20%
40%
60%
80%
100%Lo
ad F
acto
r (%
)
Passengers Load Factor
Central Asia, 5%
Subcontinent, 37%
GCC, 33%
Middle East (Ex-GCC),
15%
N. Africa, 10%
- 6 -May 2008
Investment Highlights
Highly favorable home and regional market dynamics
Strong air traffic growth projected in our target regions
Low Cost Carrier (LCC) model highly untapped in the Middle East
First mover advantage
Highly profitable Low Cost Carrier business model
Continue to drive costs lower through operational efficiencies
Consistently achieved the highest level of aircraft utilization in the A320
family
Cost-effective distribution network and booking system
Drive growth through an aggressive expansion plan
Significant route and fleet expansion planned, supported by Sharjah Airport
expansion
Track record of profitable expansion
Started operations from second hub in Nepal in Jan 08 and plans for third
hub through 2008
Support from the Sharjah and UAE Government
Experienced management team
- 7 -May 2008
Highly Favorable Home and Regional Market Dynamics
International Air Traffic Growth by Key Route Area
Middle East Passenger Traffic(1)
Source: Airbus
Strong Air Traffic Growth Projected in Our Target Regions
(1) Airbus Estimate; based on number of passengers of the top 20 airlines in the Middle East
7.1%
5.3%
5.3% 6.
0%
Middle East Routes All International Routes
AAG
R %
200
5A-2
010E
Passenger Freight
81
270
2005A 2025E
Pas
seng
ers in
MM
- 8 -May 2008
Highly Favorable Home and Regional Market Dynamics
LCC Penetration - Middle East(2)
Europe
(1) Source: IBM Business Consulting Services
North America
LCC Penetration – Proven Markets – 2005A(1)
GCC countries, particularly UAE, have a significant expatriate population from the Indian Subcontinent, Egypt and the Levant (80% of UAE population is expatriate)
Low Cost Carrier (LCC) Model Highly Untapped in the Middle East
(2) Source: Air Arabia – 2005A: based on number of passengers of Air Arabia and Jazeera Airways (1.2m; Source: respective company websites) as a percentage of total passenger traffic in the Middle East (148m; Source: Zawya.com).
2005A 2008E – Air Arabia Estimate
LCC11%
Traditional Carriers89%
LCC25%
Traditional Carriers75%
Traditional Carriers99.2%
LCC0.8%
LCC1.4%
Traditional Carriers98.6%
- 9 -May 2008
Highly Profitable Low Cost Carrier Business Model (Q3/07)
CompanyRevenue / ASK(AED - Fils)
Cost / ASK(AED - Fils)
EBITDAR
Air Asia 13.7 11.2 32.2%Air Arabia 21.1 13.6 34.3%Ryan Air 21.5 16.8 30.0%Jet Blue 20.3 19.1 16.6%South West 22.6 20.8 15.2%Vigin Blue 36.8 31.3 19.6%WestJet 34.0 29.2 23.7%GOL 29.7 29.8 13.0%EasyJet 31.1 25.9 16.6%Vueling Airlines SA 24.4 27.9 3.4%UAL Corp (US) 29.1 27.6 11.8%North West Airlines (Corp) 30.6 27.3 17.7%LCC Median 26.7 26.6 17.2%Cathy 32.6 29.6 19.8%Emirates 28.0 25.2 24.7%SIA 35.7 30.8 25.9%Qantas 53.4 49.5 19.0%Air France - KLM 51.1 47.0 17.1%British Airways 42.8 38.0 21.6%
- 10 -May 2008
Highly Profitable Low Cost Carrier Business Model
12% Y-o-Y Growth
Revenue/Passenger – Q1 2007 Vs. Q1 2008
Cost/Passenger – Q1 2007 Vs. Q1 2008
22% Y-o-Y Increase
5% Y-o-Y Increase
Cost/Passenger – Excluding fuel
Continue to Drive Costs Lower Through Operational Efficiencies
418
470
Revenue/Passenger (AED)
Q1 2007 Q1 2008
346
421
Cost/ Passenger (AED)
Q1 2007 Q1 2008
218
229
Cost/ Passenger (AED)
Q1 2007 Q1 2008
- 11 -May 2008
Highly Profitable Low Cost Carrier Business Model
98.0
98.2
98.4
98.6
98.8
99.0
99.2
99.4
99.6
99.8
100.0
7 8 9 10 11 12 13 14 15
Daily Utilization (Hours)
Ope
ration
al R
elia
bilit
y %
Source: Airbus
YTD we have achieved a flying time per aircraft of over 14 hours per day with more than 99% reliability
*
*Data indicated for Q1 2007
Avg. A320
Consistently Achieved the Highest Level of Aircraft Utilization in the A320 Family
- 12 -May 2008
Drive Growth Through an Aggressive Expansion Plan
We currently serve only 38 out of the potential 200 airports within 5-hours
flying radius
Significant Route and Fleet Expansion Planned, Supported by Sharjah Airport Expansion
5 Hour Flying Radius (Sharjah Hub)
- 13 -May 2008
Drive Growth Through an Aggressive Expansion Plan
# of Destinations vs. Net Profit Margin Breakeven Load Factor vs. Actual Load Factor*
Track Record of Profitable Expansion
(1)Two destinations added in October; Net income excluding interest on
IPO funds
Months to Recent Route
Start of Operations
Load FactorsMonths to Profitability
Chittagong - Bangladesh Jun - 07 95% 1
Peshwar - Pakistan Mar - 07 85% 2
Chennai - India Nov - 06 74% 2
Thiruvananthapuram - India Nov - 06 89% 2
Kochi - India May 06 95% 1
73% 67% 68%79% 80% 86% 85%
77%
0%
20%
40%
60%
80%
100%
2005 2006 2007 Q1 08
Breakeven load factor Actual load factor
1216
24
3238
23.0%
18.0%
4.0%0.0%0.0%
0
10
20
30
40
04 Q1 05 Q1 06 Q1 07 Q1 08 Q1
Des
tina
tion
s
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Net
pro
fit m
argi
n (%
)
Destinations Net profit margin
- 14 -May 2008
Experienced Management Team
- 15 -May 2008
Historical Financial Performance
Revenues Gross Profit
EBITDAR Net Profit
192
411
749
1,225
356
-
200
400
600
800
1,000
1,200
1,400
2004 2005 2006 2007 08 Q1
Rev
enue
s (A
ED
in M
M)
2465
130
318
53
13.8%15.8%
25.9%
17.4%
12.5%
050
100150200250300350
2004 2005 2006 2007 08 Q1Gro
ss P
rofit (
AED
in
MM
)
0.0%5.0%10.0%15.0%20.0%25.0%30.0%
% M
argi
n
Gross profit Margin
2984
182
421
130
34.0%
15.1%20.4% 24.3% 34.4%
0
100
200
300
400
500
2004 2005 2006 2007 08 Q1
EBIT
DAR (AED
in
MM
)
0.0%
10.0%
20.0%
30.0%
40.0%%
Mar
gin
EBITDAR EBITDAR Margin
0 0 5
43
7820.4%
0.0%0.0% 4.0%
18.0%
0
20
40
60
80
100
Q1 04 Q1 05 Q1 06 Q1 07 Q1 08
Net
Pro
fit (
AED
in M
M)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
% M
argi
n
Net Profit Net Margin
- 16 -May 2008
Operating Statistics
2004 2005 2006 2007 Q1 08# of Aircrafts 3 5 8 11 11Average Aircrafts 3.0 4.9 6.0 9.5 11Destinations 15 23 32 37 38# of Passengers (Millions) 0.6 1.1 1.7 2.7 0.76RPK (Billions) 1.2 2.5 3.7 5.0 1.5ASK (Billions) 1.8 3.2 4.7 5.8 1.7Average Load Factor 68.0% 79.0% 80.0% 86.0% 85%Revenue / Passenger 318.2 354.7 425.0 453.6 470Cost / Passenger 348.9 345.3 382.1 351.6 421Cost / Passenger (Ex-Fuel) 240.2 220.7 248.0 207.9 229EBITDAR Margin 13.9% 20.4% 24.9% 34.4% 34%