Air Arabia
Source: http://danfonds.blogspot.com/2009/05/air-arabia.htmlPosted on Thursday, May 28th, 2009 | In Frontier Markets, Market Commentary
Silk Invest has Air Arabia in its Arab Falcons fund. We met with the company’s Director of Finance and Administration to review how things were going in the light of the recent uptick in oil prices (a big component in any airlines costs). br /br /The company has a natural fuel hedge. In effect, when oil price is high, margins are down but revenues go up as the economy is strong. That said, the company hedged 50% of its fuel for this year at USD 55. Good news.br /br /The biggest takeaways are that this is actually a different business model from the European low cost airlines. Firstly, only 30% of tickets are sold through internet. The company has an extensive general sales agent network that adds a fee to the basic prices it distributes. This is difficult to duplicate and is very powerfull in the GCC and India where internet penetration is low. Another big difference is that the Middle East does not close airports at night. As such, the company flys 24/7. Its planes fly 14 hours a day, the highest in the world. (that is twice most other airlines!!!) Its distances are longer on average, versus the small ‘hops’ in Europe. This means four flights a day, instead of six. As a result, turnaround times are less critical. The other big difference is that it is a ‘dry airline’. As such, it does not get revenue from drink sales. By the way, this is not a negative, its customers like that! That said, it gets 2% revenue from excess bagage sales. The final difference is that Sharjah airport owns 17% of company, so new competitors flying our of Dubai can’t compete on price as it gets discounted landing fees.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/3742382075154765669-553648690088988352?l=danfonds.blogspot.com’//div
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dry airline;, Dubai, Europe, Frontier Markets, India, Internet penetration, Market Commentary, Middle East, Oil Price, Oil Prices, sales agent network;, Sharjah airport;, USD
 About Daniel Broby (http://danfonds.blogspot.com)
Danfonds Frontier Markets blog tells the story of the life and times of a Frontier Market's Hedge Fund. Care is taken to avoid any exposure of confidential information and names and places are withheld to upheld the integrity of our many friends in the industry. Please note that this is a blog. It does not constitute investment advice or an offer to invest. Any interpretation otherwise is just plain stupid. Frontier markets can be risky and volatile. Daniel Broby joined Danfonds Aps from Renaissance Investment Management (UK) Limited where he was Chief Executive Officer. He held various roles and responsibilities throughout the RIM group, principally those of Chief Investment Officer, Head of Asset Management and Director of the Renaissance Africa Fund. His roles involved extensive travel to and from offices in Moscow, Kiev, Nairobi, Geneva and London. In addition to the day to day management of the group’s various investment teams, he also oversaw the successfull launch of the Renaissance Africa Fund, the Global Macro Fund for RIM (UK) and the successfull launch of the offshore Renaissance Russia Infrastructure Fund for RIM. Prior to Renaissance Investment Management he was a member of the BankInvest Investment Board and joint manager of BankInvest Basis, a flagship global product, rated five stars on Morningstar. Daniel joined Bankinvest, Denmark's third largest asset manager, as chief investment officer in 2000, responsible for the investment process and the day-to-day running of the quoted equity, bond and guaranteed products. He transferred these responsibilities in July 2004 and launched Denmark’s first and only regulated hedge fund on behalf of Bankinvest in November 2005. Daniel joined the fund management industry at the end of 1985 as a trainee at Credit Suisse Buckmaster and Moore. Prior to his role at BankInvest, he was chief portfolio manager at Nordea Investment Management and prior to that head of international research at Morgan Stanley Quilter. Daniel has an MPhil in economics and an MSc in investment analysis. He was a board member of CFA (UK) for over 10 years. He was the CFA Institute’s President Council Representative for Europe, Middle East and Africa for four years and was presented with the Institute’s Society Leader Award in 2006. He now serves as a member of the Capital Markets Policy Council. He was elected an individual member of the London Stock Exchange in 1990 and is a Fellow of the Securities Institute in the UK. |
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