February 14, 2019 / 9:03 AM / 7 days ago

UPDATE 1-Abraaj exposure drags Air Arabia to a $166 mln 2018 loss

(Adds analyst quote, share price)

By Saeed Azhar

DUBAI, Feb 14 (Reuters) - Air Arabia suffered a 609.5 million dirham ($166 million) loss in 2018 as it took impairments on its exposure to collapsed private equity firm Abraaj, knocking its shares on Thursday as analysts said its dividend could be hit.

The Dubai-based carrier, whose stock fell by more than 7 percent on the results, had posted a net profit of 630.6 million dirhams in the same period a year ago.

Air Arabia said it faced impairment charges of 1.13 billon dirhams, mainly due to exposure to Abraaj-related investments.

“While Air Arabia’s liquidity status and profitable operations remain intact, this step aims to serve the best interests of the company and its investors,” it said.

Dubai-based Abraaj was the largest buyout fund in the Middle East and North Africa until it collapsed last year in the aftermath of a row with investors, including the Gates Foundation, over a $1 billion healthcare fund.

“While we expected this to happen, this will affect Air Arabia’s ability to pay dividends,” said Nishit Lakhotia, head of research at Bahrain-based SICO.

“Further, this has affected its balance sheet and possibly will imply a higher rate for airline purchase or leasing.”

Air Arabia added 26 new routes to its global network in 2018 from its operating hubs in the United Arab Emirates, Morocco and Egypt, it said in a statement on its website.

The carrier took delivery of three new aircraft and ended the year with a fleet of 53 Airbus A320 aircraft operating to over 155 routes across the Middle East, Africa, Asia and Europe.

Air Arabia shares were down 5.6 percent at 0.935 dirhams at 0859 GMT, after earlier hitting their lowest level since April 2013.

Abraaj’s liquidators are in the process of determining the value its assets to settle liabilities, said Air Arabia, which last month revealed that it has begun legal proceedings against Abraaj founder Arif Naqvi in Sharjah.. (Reporting by Saeed Azhar Editing by Alexander Smith)

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