Air Arabia sees tough conditions into Q2 2010

DUBAI, Nov 16 (Reuters) - Low-cost carrier Air Arabia AIRA.DU, which reported its first drop in quarterly profit on Saturday, expects difficult market conditions to extend into the second quarter of next year, an official said on Monday.

Air Arabia, the largest listed Arab airline by market value, saw third-quarter profit fall 9 percent, a decline it attributed to the global H1N1 flu virus pandemic and the fasting month of Ramadan. Profit fell 9 percent to 144 million dirhams ($39 million).

"The market remains challenging," Paul Suckling, Air Arabia's director of finance and administration, told a conference call. "We perhaps are starting to see a little bit of improvement but generally, we think Q1 and maybe going into Q2 may still be depressed.

"It's going to remain as difficult as it has been."

Suckling said the carrier is targeting passenger load factors -- which show how successful airlines are in filling seats -- of about 80 percent. The measure stood at 79 percent in the nine months to end-September, Air Arabia said.

"There is no reason that should change, we continue to drive our costs down," Suckling said.

Air Arabia competes with Kuwait-based Jazeera Airways (JAZK.KW) and Saudi-based Nas Air and Sama.

The Sharjah, United Arab Emirates-based airline is launching a new budget carrier with an Egyptian partner and setting up a third hub in Alexandria. It began flying from its Casablanca hub earlier this year.

Suckling said any additions to the Air Arabia fleet next year would likely be put into service in its Egyptian or Moroccan operations.

(Reporting by Amran Abocar; Editing by John Stonestreet)