DUBAI // Air Arabia, the region's largest low-cost carrier, bucked the trend of falling profits in the global airline industry by posting a rise in earnings for the second quarter. The company, based in Sharjah, reported net profits rising by 14 per cent to Dh82 million (US$22.3m) based on a 34 per cent increase in passenger numbers in the three months to the end of June. "During a period of unprecedented challenges for the global aviation industry as a result of the continuously soaring oil price, we are extremely proud of these results," said Sheikh Abdullah bin Mohammed Al Thani, the chairman of Air Arabia. Adel Ali, the chief executive at Air Arabia, said he expected profitability to grow by more than 14.7 per cent for the full year. "Our target is to do better than 14.7 per cent in 2008," Mr Ali told Reuters, adding that he hoped oil prices would stabilise. Air Arabia stocks, which are listed on the Dubai Financial Market, have taken a recent beating, dropping 20 per cent since the beginning of June. Sheikh Abdullah said he thought his company had the right model and infrastructure to remain among the most profitable airlines in the world. Middle Eastern airlines are expanding fast in contrast to their western counterparts, which are scaling down operations to compensate for high fuel prices. Oil hit a record last month of more than $147 a barrel, but prices have since dropped by about 15 per cent. Air Arabia will remain focused on expansion and operational reliability as it expands its destination network in the Middle East, North Africa, South and Central Asia, Sheikh Abdullah said. The carrier recently announced that it had received more than 10 million passengers since launching in October 2003. It introduced four new destinations in the first half of this year - including Kozhikode and New Delhi in India, Shiraz in Iran and Dhaka in Bangladesh - taking its total network to 41 destinations. Analysts expect Air Arabia to suffer from the arrival of a new competitor next year, when FlyDubai, owned by the Dubai Government, starts operating out of nearby Dubai International Airport. "Apart from rising oil prices, the future competition for the airline is a question mark on the profitability," said Ayman el Saheb, the head of operations at Dubai's Darahem Financial Brokerage. The second quarter figures were at the lower end of analysts' expectations. A survey of four analysts conducted by Reuters in June reported a range of profits from Dh77.5m to Dh131.25m. For the first six months of this year, Air Arabia's average seat load factor - or the percentage of passengers carried out of the total number of seats available - stood at 86 per cent, up 3.6 per cent from the same period last year. @Email:skhan@thenational.ae