RIYADH (Reuters) – United Arab Emirates-based Air Arabia plans to double its leased aircraft fleet to 22 by 2010 in addition to buying up to 50 planes as it increases flights in the Middle East and Asia, its CEO said on Tuesday.
The Middle East’s largest low-cost carrier can raise funding of 3.3 billion dirhams ($898.9 million), the largest part of which will be spent on the purchase of Boeing 737 or A320 from Airbus, Adel Ali said.
The firm also looks to use some of the cash to enhance its infrastructure and to build a 350-room hotel in the UAE emirate of Sharjah, its hub, which will be managed by leisure group Rotana, he added.
“We expect an order for 34 to 50 aircraft; the better the price, the higher the order … The largest part of the financing will come from local and foreign banks,” he told reporters in the Saudi capital Riyadh. He declined to be more specific.
“The cost of each aircraft is around $50 million,” Ali said.
Based on this price, the deal could be worth up to $2.5 billion.
Ali said on Sunday the airline planned to raise its purchases to up to 50 aircraft, without giving any price figures.
Details for the purchase deal will be announced within 10 days, he said.
Air Arabia sold a 55 percent stake in the Middle East’s first airline IPO in April. The $700 million it raised in the share sale will help pay for the aircraft, Ali said.
“We initially were planning to buy 34, but the market changes, and needs change for the better … There are talks with suppliers; there might be an order for 34, 40 or 50,” he said.
After the privatisation, Ali said the firm had liquidity, so there was no intention either to hike capital or to issue bonds.
The firm plans to double to 22 the number of leased aircraft, Ali told Reuters on the sidelines of a conference. Air Arabia’s fleet is made of 11 leased A320 aircraft.
He said the rise in the number of aircraft aims to tap rapid growth in the Middle East air passenger traffic and to cater for company plans to add a new hub.
“Annual growth in the region’s air traffic is 2-3 percent above global growth,” Ali said. “It is expected that by 2025, the number of passengers in the Middle East will rise from 80 million in 2005 to 270 million, which means that every 10 years the figure will double.”
He declined to provide any details on the hub expansion plan, saying only that he was in talks with Egyptian authorities to be allowed access to Cairo. The company already serves Alexandria.