Air Arabia PJSC

Investor Presentation February 2008

February 2008
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Disclaimer
Information contained in this presentation is subject to change without notice, its accuracy is not guaranteed and it may not contain all material information concerning the company. Neither we nor our advisors make any representation regarding, and assumes no responsibility or liability for, the

accuracy or completeness of, or any errors or omissions in, any information contained herein.
In addition, the information contains projections and forward-looking statements that reflect the companys current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur, that projections will be achieved, or that the companys assumptions are correct. Actual results may differ materially from those projected. This presentation is strictly not to be distributed without the explicit consent of Company management under any circumstance.

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Agenda

Air Arabia at a Glance Investment Highlights Financial Highlights Strategy and Outlook

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Air Arabia at a Glance

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Highlights
Route Network as of December 2007

A national carrier of the UAE Established in 2003 by

the Government of Sharjah

First and largest low-cost airline in the MENA region

5.03 billion RPK(1) 2.5x the number of passengers as its closest LCC rival(1)

Current fleet of 11 leased Airbus 320s Network covering a total population of 1.7 billion, 37
destinations in 21 countries within the Subcontinent, MENA region and Central Asia

Broke even within the first full year of operations Awarded best low cost carrier in the Middle East by
Skytrax

Adel Ali, CEO was awarded the CEO of the year 2007
by Aviation Business Magazine
(1)For

Year Ending 31 December, 2007

Started operations from second Hub in Nepal in Jan 08

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February 2008

Passenger and Aircraft Growth

Number of Destinations
40 35 30 25 20 15 10 5 0 2003 2004 2005 2006 2007 5 15 23 32 37

Fleet Size
12 10 8 6 4 2 0 2004 2005 2006 2007 3 5 8 11

Total Passengers and Load Factor

Geographic Distribution

3,000

Passengers ('000s)

Load Factor (%)

2,500 2,000 1,500 1,000 500 -

79% 68% 1,133 547

2,700 80% 1,763 86% 85%

100% 80% 60% 745 40% 20% 0%

N. Africa, 10% Middle East (Ex-GCC), 15%

Central Asia, 5%

Subcontinent, 37%

2004

2005 Passengers

2006 2007 Load Factor

Q4 2007

GCC, 33%

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Investment Highlights

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Investment Highlights
Highly favorable home and regional market dynamics
Strong air traffic growth projected in our target regions Low Cost Carrier (LCC) model highly untapped in the Middle East

First mover advantage

Highly profitable Low Cost Carrier business model

Continue to drive costs lower through operational efficiencies Consistently achieved the highest level of aircraft utilization in the A320 family Cost-effective distribution network and booking system

Drive growth through an aggressive expansion plan

Significant route and fleet expansion planned, supported by Sharjah Airport expansion Track record of profitable expansion Started operations from second hub in Nepal in Jan 08 and plans for third hub through 2008

Support from the Sharjah and UAE Government Experienced management team
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Highly Favorable Home and Regional Market Dynamics

Strong Air Traffic Growth Projected in Our Target Regions
International Air Traffic Growth by Key Route Area Middle East Passenger Traffic(1)

7.1%

AAGR % 2005A-2010E

5.3%

5.3%

6.0%

270

Passengers in MM

81

Middle East Routes Passenger

All International Routes Freight

2005A

2025E

Source: Airbus
(1) Airbus

Estimate; based on number of passengers of the top 20 airlines in the Middle East

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Highly Favorable Home and Regional Market Dynamics

Low Cost Carrier (LCC) Model Highly Untapped in the Middle East
LCC Penetration Proven Markets 2005A(1) Europe
LCC 11%

LCC Penetration - Middle East(2)

2005A
LCC 0.8%

2007E Air Arabia Estimate

LCC 1.4%

Traditional Carriers 89%

North America
LCC 25%

Traditional Carriers 99.2%

Traditional Carriers 98.6%

GCC countries, particularly UAE, have a significant expatriate population from the Indian Subcontinent, Egypt and the Levant (80% of UAE population is expatriate)
Traditional Carriers 75%
(1) Source:

IBM Business Consulting Services

(2) Source:

Air Arabia 2005A: based on number of passengers of Air Arabia and Jazeera Airways (1.2m; Source: respective company websites) as a percentage of total passenger traffic in the Middle East (148m; Source: Zawya.com).

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Highly Profitable Low Cost Carrier Business Model

Company Air Asia Air Arabia Ryan Air Jet Blue South West Vigin Blue WestJet GOL EasyJet Vueling Airlines SA UAL Corp (US) North West Airlines (Corp) LCC Median Cathy Emirates SIA Qantas Air France - KLM British Airways Revenue / ASK (AED - Fils) 13.7 21.1 21.5 20.3 22.6 36.8 34.0 29.7 31.1 24.4 29.1 30.6 26.7 32.6 28.0 35.7 53.4 51.1 42.8 Cost / ASK (AED - Fils) 11.2 13.6 16.8 19.1 20.8 31.3 29.2 29.8 25.9 27.9 27.6 27.3 26.6 29.6 25.2 30.8 49.5 47.0 38.0 EBITDAR 32.2% 34.3% 30.0% 16.6% 15.2% 19.6% 23.7% 13.0% 16.6% 3.4% 11.8% 17.7% 17.2% 19.8% 24.7% 25.9% 19.0% 17.1% 21.6%

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Highly Profitable Low Cost Carrier Business Model

Continue to Drive Costs Lower Through Operational Efficiencies
Revenue/Passenger Q4 2006 Vs. Q4 2007
469

Cost/Passenger Q4 2006 Vs. Q4 2007

401

433

372

Revenue/Passenger (AED) Q4 2006 Q4 2007

Cost/ Passenger (AED) Q4 2006 Q4 2007

8% Y-o-Y Growth

8% Y-o-Y Increase

Revenue/Passenger 12M 2006 Vs. 12M 2007

454

Cost/Passenger 12M 2006 Vs. 12M 2007

382

425

352

Revenue/Passenger (AED) 2006 2007

Cost/Passenger (AED) 2006 2007

7% Y-o-Y Growth

8% Y-o-Y Decline

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Highly Profitable Low Cost Carrier Business Model

Operating Costs as a Percentage of Revenues
% of Revenue 101.0%
4.6% 13.6% 14.4% 11.4% 14.4% 3.7% 12.5% 11.4% 10.9% 13.5% 3.7% 14.3% 9.1% 9.9% 13.9% 2.3% 11.9% 8.9% 11.0% 11.8%

93.8%

89.0%

84.7%

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

28.5%

32.4%

31.2% 4.2% 2.7%

31.7% 2.9% 4.2%

6.5% 7.6%

5.1% 4.3%

2004 G&A Expenses Direct Staff

2005 Sales & Marketing Maintenance

2006 Fuel Airport Charges

2007 Aircraft Lease Others*

* Other Costs include insurance and other operating costs

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Highly Profitable Low Cost Carrier Business Model

Consistently Achieved the Highest Level of Aircraft Utilization in the A320 Family
*

100.0 99.8

Operational Reliability %

99.6 99.4 99.2 99.0 98.8 98.6 98.4 98.2 98.0 7 8 9 10 11 12 13 14 15

Avg. A320

Daily Utilization (Hours)

*Data indicated for Q1 2007

Source: Airbus

YTD we have achieved a flying time per aircraft of over 14 hours per day with more than 99% reliability

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Highly Profitable Low Cost Carrier Business Model

Cost Effective Distribution Network and Booking System
Internet bookings significantly reduce staff and running
costs Distribution Channels
2006 Internet Booking Call Centers/Shops Travel Agents 23% 18% 59% 2007E 30% 17% 53% 2008E 50% 15% 35%

No travel agent costs Agreement with Emirates Bank to use ATMs as a new
distribution channel

Customized in-house booking system that significantly

reduces back-office staff costs and Global Distribution System (GDS) costs Typical GDS costs are $8/trip, as opposed to Air Arabias current cost of less than $1/trip

Air Arabias system is customized to perform the following

functions Electronically process reservations Manage the dynamic pricing process (nesting) Credit control of booking channels Simplified back-office accounting systems with travel agents

Significantly Lower Sales and Marketing Costs Vs. Traditional Carriers(1)

2.83

0.67

Billing to booking channels and payment receipts

(1) Air

Cost/ASK (FILS) Air Arabia Traditional M.E. network Carrier

Arabia Estimate

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Drive Growth Through an Aggressive Expansion Plan

Significant Route and Fleet Expansion Planned, Supported by Sharjah Airport Expansion
5 Hour Flying Radius (Sharjah Hub) Fleet Expansion (Sharjah Hub)

Aircrafts

34 19 8 2006 11 2007 2010P 2015P

Target Destinations

32

50

85

Sharjah Airport Expansion

8.5

PAssengers (in MM)

2007
Source: Sharjah Airport Website

2008P

We currently serve only 37 out of the potential 200 airports within 5-hours flying radius February 2008

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Drive Growth Through an Aggressive Expansion Plan

Track Record of Profitable Expansion
# of Destinations vs. Net Profit Margin
40 35 30 25 20 15 10 5 0 32 23 15 7.6% 0.0% 2004A 2005A 2006A 2007A Net profit margin 13.5%

Breakeven Load Factor vs.*Actual Load Factor

Net profit margin (%)

37

35.0% 30.0% 30.2% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

Destinations

100% 80% 60% 40% 20% 0% 2005 2006 2007 Actual load factor 77% 79% 73% 80% 86% 67%

Destinations

Breakeven load factor

Recent Route Chittagong - Bangladesh Peshwar - Pakistan Chennai - India Thiruvananthapuram - India Kochi - India
(1)Two

Start of Operations Jun - 07 Mar - 07 Nov - 06 Nov - 06 May 06

Months to Months to Load Factors Profitability 95% 85% 74% 89% 95% 1 2 2 2 1

destinations added in October; Net income excluding interest on IPO funds

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Experienced Management Team

HH Sheikh Abdullah Bin Mohammed Al Thani Chairman H.H. Sheikh Abdullah holds several prominent positions in the UAE. H.H. Sheikh Abdullah is also the Chairman of the Sharjah Airport Authority Chief Executive Office Adel A. Ali Mr. Adel Ali was ranked one of the 100 most influential Arabs by Arabian Business magazine. Mr. Ali has over 25 years of experience in the regions Airline business including holding senior management positions with British Airways. . He was selected as Airline CEO of the year 2007 by Aviation Business Magazine. Mr. Ali is also Board Member and CEO of FlyYeti.com. COO FlyYeti.com Donald Hubbard Has held various financial positions at Deloitte & Touche, Hong Kong Telecom, Jardine Securicor Group and SSI. Donald served as Director of Strategy and Planning at Air Arabia prior joining the new established LCC in Nepal FlyYeti.com as COO where Air Arabia is the major shareholder in.

Director of IT & Other Corporate Projects Ali Hamdany Over 15 years of experience in Information Technology from British Airways, Sun Microsystems, Logica and UBS

Director of Finance & Administration Paul Suckling Extensive knowledge of LCC operations. Prior experience includes senior positions with both Ryanair and EuroManx

Head of Commercial AK Nizar

Director of Operations & Maintenance Mohamed Ahmed

over 20 years experience of practical airline commercial and operating Chief Pilot at Gulf Air prior to joining Air Arabia, experience and part of the start up team. Prior to joining Air Arabia, has been trained in a wide range of management Nizar held key managerial positions within Gulf Air and British Airways disciplines, including strategic planning, CRM and in the UAE and Saudi Arabia, including Gulf Air Area Manager and aviation management British Airways Sales Manager for Dubai & Northern Emirates.

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Financial Highlights

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Historical Financial Performance

Revenues Gross Profit

Revenues (AED in MM)

749 411 192

15.8% 12.5% 24 2004 65

17.4% 130

20.0% 15.0% 10.0% 5.0% 0.0%

600 400 200 -

2005 Gross profit

2006 Margin

2007

2004

2005

2006

2007

EBITDAR
EBITDAR (AED in MM)
500 400 300 200 100 0 2004 2005 EBITDAR 2006 20.4% 15.1% 29 84 24.3% 182 40.0% 35.0% 34.4% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2007 421
400 350 300 250 200 150 100 50 0

Net Profit
370 30.2% 35.0% 30.0% 20.0% 7.5% 31 2005 Net Profit 13.5% 101 15.0% 10.0% 5.0% 0.0% 2006 Net Margin 2007 25.0%

Net Profit (AED in MM)

% Margin

0.0% 0 2004

EBITDAR Margin

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% Margin

% Margin

1,400 1,200 1,000 800

Gross Profit (AED in MM)

1,225

350 300 250 200 150 100 50 0

318 30.0% 25.9% 25.0%

Q4 2007 Financial Highlights

Revenues
Growth Rate Q4 06 Q4 07: 62% Q3 07 Q4 07: -5%
400 350 369 349

EBITDAR Margin
40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

34.4% 24.3%

AED in Millions

300 250 200 150 100 50 0

215

FY 2006
Q4 2006 Q3 2007 Q4 2007

FY 2007

Net Income(1)

Net Income Margin(1)

200

50% 40% 30%

165 90 33 Q4 2006 Q3 2007 Q4 2007

Including Interest

Excluding Interest 45% 33% 26%

AED in Millions

150 100 50 0

20% 10% 0%

15%

14%

Q4 2006

Q3 2007

Q4 2007

(1)Including

interest on cash proceeds from the recent IPO (AED 44m in Q3 2007)

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Strategy and Outlook

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Business Strategy
Offer the lowest fares in the MENA region on a profitable basis, through a single class
offering with a simple fare structure

Continued focus on the Low Cost model

Focus on lowering costs and introducing operational efficiencies Offer point-to-point service to maximize aircraft utilization Utilize single aircraft type to contain employee training, maintenance and purchasing
costs

Increase the frequency of existing routes and add destinations in the Indian SubContinue to grow network and maintain market leadership on a profitable basis
continent, MENA, Eastern Mediterranean and the CIS on a profitable basis

Expand fleet to, at least, 34 aircraft in the Sharjah hub within the next 10 years Evaluate expansion through new hub(s)
Started operations from second hub in Jan 08 and target an additional hub in the next 12 months

Seek strategic acquisition opportunities Grow complimentary operations.

Evaluate strategic opportunities in our target market regions

Expand complimentary operations to control costs, enhance profitability and improve quality and
reliability of services

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Business Outlook
Long-term Outlook 2010E ~ 19 ~ 50 ~ 4.5 Million Growth expected to be maintained at ~ Growth expected to 20%-25% p.a. for the be at ~ 30% p.a. next 3 years EBITDAR margin EBITDAR margin level (~30%) level (~30%) ST Outlook 2008 outlook 14 40 3.3 Million

Aircraft Destinations Passengers

Sharjah Hub

2007 11 37 2.7 Million

Revenue Y-o-Y Growth Profitability

64% EBITDAR margin at 34%

Nepal Hub

Aircraft Destinations Passengers

q

-----

2 6

~6 ~ 20 ~ 1.4 Million

Complimentary Operations

We target a 15% return on investments in our complimentary operations, in the long-term

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Appendix

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Operating Statistics
2004 3 3.0 15 0.6 1.2 1.8 68.0% 318.2 348.9 240.2 13.9% 2005 5 4.9 23 1.1 2.5 3.2 79.0% 354.7 345.3 220.7 20.4% 2006 8 6.0 32 1.7 3.7 4.7 80.0% 425.0 382.1 248.0 24.9% 2007 11 9.5 37 2.7 5.0 5.8 86.0% 453.6 351.6 207.9 34.4%

# of Aircrafts Average Aircrafts Destinations # of Passengers (Millions) RPK (Billions) ASK (Billions) Average Load Factor Revenue / Passenger Cost / Passenger Cost / Passenger (Ex-Fuel) EBITDAR Margin

February 2008

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