Air Arabia to Seek State Aid and Delay Launch of Low-Cost Carrier

(Bloomberg) -- Air Arabia PJSC has joined airlines globally in seeking state support and plans to delay the launch of a new low-cost carrier as the Covid-19 outbreak continues to wreak havoc on the aviation industry, according to people familiar with the matter.

The airline has asked the United Arab Emirates government for financial assistance, said the people, who asked not to be identified as the matter hasn’t been made public. Details of the magnitude of the package haven’t been disclosed.

Air Arabia Abu Dhabi, a joint venture with Etihad Airways slated to start flying by the end of June, has been put on hold, said the people. The two airlines intend to revive the plan when demand for global travel recovers from the impact of the pandemic, they said.

In a statement, Air Arabia called the report “baseless and speculative.” It said that preparatory work for the launch of the low-cost carrier “remains in motion and will progress as the market situation improves.”

An Etihad representative didn’t have a comment. The U.A.E. government referred questions to authorities in the city of Sharjah, where Air Arabia is based. They couldn’t be reached for comment.

Air Arabia to Seek State Aid and Delay Launch of Low-Cost Carrier

Shares of Air Arabia rose as much as 2.9% in Dubai on Tuesday. They are down 35% this year, in line with a wider global aviation sell off.

Airlines have been hit with an unprecedented near-total shutdown of travel as the coronavirus crisis sweeps across continents and governments close borders and order populations to stay at home. About 70% of global carrier capacity is idled and the industry could burn through $61 billion in the second quarter alone, according to the International Air Transport Association.

Emirates, the world’s biggest long-haul airline, has already been promised support by Dubai, its owner. Other carriers looking for government assistance include Deutsche Lufthansa AG and Air France-KLM.

Air Arabia operates a multi-hub business with bases in Morocco and Egypt as well as Sharjah. The carrier ordered 120 Airbus SE narrow-body jets worth about $14 billion late last year to drive expansion into southeast Asia and Africa.

©2020 Bloomberg L.P.

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