Etihad and Air Arabia start Abu Dhabi-based budget carrier

Abu Dhabi’s giant Etihad Airways and Sharjah’s low-cost carrier Air Arabia announced an agreement to launch a new low-cost airline based in the UAE capital. (File/AFP)
Updated 16 October 2019

Etihad and Air Arabia start Abu Dhabi-based budget carrier

  • The new Air Arabia Abu Dhabi will be launched in due course: Etihad CEO
  • Etihad invested heavily in carriers around the world

LONDON: Etihad Airways is setting up a low-cost carrier with Air Arabia in what is a major change of direction for the Abu Dhabi-based airline.
It represents Etihad’s first tie-up with another airline since its ill-fated equity alliance strategy which saw it take stakes in a number of struggling European carriers, some of which went bust, including Air Berlin.
Air Arabia Abu Dhabi will operate from Abu Dhabi International Airport and will target rising demand from the budget segment, the pair said in a statement on Wednesday.
Etihad Group CEO Tony Douglas said: “This exciting partnership supports our transformation program and will offer our guests a new option for low-cost travel to and from Abu Dhabi, supplementing our own services.”
Abu Dhabi-based Etihad and Dubai-based Emirates invested heavily in their premium-cabin offering during the UAE’s boom years, tapping into strong regional demand for business and first-class travel. However, the sharp fall in oil prices since 2014 and a regional economic slowdown has hit premium travel hard and forced both carriers to cut costs and lay off staff.
Etihad’s move into the low-cost segment mirrors a similar partnership between Emirates and flydubai, the low- cost carrier started in 2008.
Etihad and Air Arabia did not say when flights would start or which routes would be served, but that further details “would be communicated in the near future.”
While premium travel continues to face headwinds in the Gulf, demand remains strong in the budget segment. Low-cost carriers accounted for a 17 percent share of seat capacity to and from the Middle East in 2018, compared to only 8 percent in 2009. 
Etihad Airways currently flies to about 80 destinations with a fleet of 108 Airbus and Boeing aircraft that carried 17.8 million passengers in 2018. Air Arabia, which is listed on the Dubai Financial Market, operates 54 Airbus A320 and A321 aircraft and serves 170 routes.

Investment and energy experts welcome ‘sensible’ Saudi Aramco IPO valuation

Updated 18 November 2019

Investment and energy experts welcome ‘sensible’ Saudi Aramco IPO valuation

  • Price regarded as a sensible compromise and that it will sell the IPO
  • Experts said the Aramco valuation was justified by the financial metrics

DUBAI: Investment professionals and energy experts delivered a mainly enthusiastic response to the pricing of shares in Saudi Aramco and the overall valuation of the biggest oil company in the world at between $1.6 trillion and $1.7 trillion.

Al Mal Capital, a Dubai-based investment bank, said that it was positive on the Aramco initial public offering (IPO) on that kind of valuation, which it said was justified by the financial metrics.

“We believe Aramco’s IPO is a central pillar of Saudi Arabia’s Vision 2030. In our view, the broader privatization of state assets will likely accelerate the flow of foreign capital into the Kingdom, improve liquidity and transparency as well as continue to help diversify its economy away from its dependency on oil. While many investors were skeptical about the ability of Saudi Arabia to roll out its ambitious agenda, they seem to be right on track.”

Tarek Fadhallah, chief executive officer of Nomura Asset Management in the Middle East, said via Twitter: “My first impression is that the price is a sensible compromise and that it will sell the IPO. Aramco should easily raise the $8.5bn from retail investors but the 29 global coordinators, managers and financial advisers will need to find the other $17 billion. A few billion from China would help.”

Robin Mills, chief executive of the Qamar Energy consultancy, said; “I think it’s a reasonable compromise. The price is well above most independent valuations but well below the aspirational price. It implies dividend yields a bit lower than the super-majors (the independent oil companies), but a similar price earnings ratio (the measure of the share price rated according to profits). Retail and local investors should be sufficient. We’ll have to see about the foreign investors.”

Ellen Wald, energy markets consultant and author of the book Saudi, Inc., said American investor would still be undecided on the IPO. 

“Remember, investors don’t put money in because they think the value is accurate. Smart investors put money in because they think the value will rise. It all depends on whether they see signs the price will rise during their time frame.”

American oil finance expert David Hodson, managing director of BluePearl Management, said: “This valuation seems to be more reasonable based on the fundamentals. Potential investors in Western markets will base their decision on cold hard facts like dividends and growth prospects. From what we now know, Aramco is offering them a compelling investment proposition to consider.”