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Analysis of Air Arabia
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Analysis of Air Arabia
Various aspects of Air Arabia contribute to its success. The contributions of the
counterparties play a crucial role in various aspects such as the working capital, Aircraft
financing, LCBG investment and forex.
Working Capital
Working capital is a measure of the extent of overall financing provided to a business for
its day-to-day operations, in this case, for Air Arabia. The other prominent counterparties and
their roles in working capital are: Other significant leaders and their roles in working capital
include Bank of China with $1190.28 million, ICBC with $501.17 million, SCB with $27.59
million, UMB Bank with $4590.37 million, NATIXIS with $137.31 million, Sharjah with $300
million, Alhilal Bank with $1475.52 million, and KEB with $457.21 million. The largest figure
in this aspect is depicted by UMB Bank at $4590.37, followed by Alhilal Bank at $1475.52
million. This shows that Air Arabia has sourced most of its cash from UMB Bank to cater to its
operations, given that it has acquired essential funds to fund its operational costs.
Aircraft Financing
Aircraft financing is the credit or funding available for purchasing or leasing initiatives.
Some of its major counterparties in this sector ANZ with $1279.06 million, Banco Santander
with $5826.36 million, Bank of America with $1488.45 million, Bank of China with $4055.46
million, BNP with $2700.46 million, CB with $6171.52 million, CA with $6548.35 million,
HSBC with $12504.7 million, Investec Bank with $6449.27 million, SMBC with $2565.52
million, SG with $420.95 million, SCB with $19073.74 million, and UMB Bank with $4009.43
million. SCB is the largest financier of aircraft at $19,073.74 million, followed by HSBC with
$12504.7 million and then CA at $6,548.35 million. These substantial amounts depict how Air
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Arabia relies on these banks to meet most of its aircraft-related expenses to facilitate the
expansion and modernization of aircraft. SG contributes the least in financing, with 420.95
million.
Letters of Credit and Bank Guaranteed Transactions (LCBG)
LCBG acts as a guarantee of payment to the suppliers and is very important in funding
the operations. Players of note are HSBC with $0.33 million, Mashreq with $0.55 million, UAB
with $2.52 million, Commercial Bank with $17.96 million, and Alhilal Bank with $1.28 million.
From these banks, Commercial Bank stands to have the highest LCBG at $ 17.96 million,
showcasing the company's importance as a surety for funding Air Arabia's purchase and trading
activities. However, the actual amounts for LCBG are much lower than the total values, which
indicates that the company might not significantly depend on LCBGs in contrast to its other
requirements.
Deposits and Money Market Fund (MMF)
Deposits and MMF are listed as short-term instruments of investment which offer
liquidity with interest. The major contributors of this category are Bank of China with $15850
million, Deutsche Bank (DB) with $5870 million, HSBC with $2747.77 million, ICBC with
$3170.09 million, SCB with $1350 million, Sharjah with $8837.77 million, UAB with
$11292.01 million, Commercial Bank with $11547.76 million, Noor Bank with $1000 million,
Alhilal Bank with $6650.35 million, and Ajman Bank with $4525.72 million. Following the
order of large deposits/MMFs, the figures are as follows: Bank of China $ 15,850 million,
Commercial Bank $11547.76 million, and UAB $11,292.01 million. Due to their significant
amounts, these deposits point to considerable short-term resources and facilities available with
the institutions to support Air Arabia’s financial requirements.
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Foreign Exchange (FOREX)
High ratios of foreign exchange holding protect against fluctuations in foreign exchange
rates. Some of the balances include Citigroup with $668.39 million, DB with $1397.06 million,
HSBC with $1001.07 million, SCB with $421.81 million, Goldman Sachs (GS) with $538.7
million, NATIXIS with $143.46 million, Mashreq with $98.32 million, Sharjah with $377.64
million, UAB with $95.47 million, Commercial Bank with $584.03 million, Alhilal Bank with
$90.65 million, Ajman Bank with $90.65 million, and KEB with $98.63 million. DB holds the
largest FOREX amount at $1397.06 million, followed by HSBC at $1001.07 million and
Citigroup at $668.39 million. This indicates that these institutions help control relayed currency
risks in Air Arabia and, therefore, control their financial risks resulting from currency volatility.
Conclusion
Air Arabia's vast financial credit association includes various global and local banks
comprising various goals and objectives suitable for the organization's financial requirements.
These financing arrangements comprise substantial working capital and aircraft financing to
result in efficient LCBG commitment, as well as efficient forex operations to encourage Air
Arabia's operational efficiency, as well as a continuous expansion of its aircraft collection and
secure financial position. UMB Bank, Alhilal Bank, and Bank of China are the key contributors
to the company's working capital. Major financiers in aircraft financing are SCB, HSBC, and
CA. CB remains to be the highest contributor to Air Arabia’s LCBG. There are also other
considerations, such as Forex and investments. Such aspects are vital in ensuring the successful
operation of Air Arabia. The various and healthy cash flows demonstrated by the airline mean
that the company possesses a credible market standing and credit status to ensure success in the
competitive aviation environment.
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