UAE budget carrier Air Arabia said quarterly net profit rose 11.7 per cent, beating analysts' forecasts, as a hike in fuel costs was offset by a rise in number of passengers seeking low-cost flying options.

Air Arabia earned a net profit of Dh47.7 million ($13 million) for the first-quarter, it said in a statement on Sunday, compared with Dh42.7 million profit a year earlier.

Revenues for the quarter was Dh621 million, an increase of 21 per cent to the Dh513 million it posted in the same period of 2011.

The earnings beat forecasts by two analysts, who had expected an average net profit of Dh37.45 million for the quarter in a Reuters poll.

The carrier said a demand for low-cost transport in the region helped the airline get past the impact of rising fuel costs that has forced may airlines to hike ticket costs.

The airline served 1,230,807 passengers in the first quarter of 2012, an increase of 7 per cent compared to 1,153,807 passengers in the same period last year.

'Though political instability and sustained high fuel costs continue to challenge regional carriers, the appeal of air transport, and especially the low-cost model pioneered by Air Arabia in the region, remains strong,' said Sheikh Abdullah Bin Mohammad Al Thani, chairman of Air Arabia.

He continued: “Air Arabia will continue to enter into new markets and to launch new ventures in 2012, supporting the airline’s robust commercial and operational performance, while providing our customers with an even wider choice of affordable air travel options.”

Dubai's Emriates, one of the world's top airlines, said last week that fuel charges were about $2 billion in 2011, accounting for 40-43 per cent of the airline's costs.

Emirates is expected to report its earlier later this month. The emirate's budget carrier flydubai also plans to increase ticket costs.

Air Arabia, headquartered in the emirate of Sharjah, also has hubs in Egypt and Morocco. It competes with regional low cost carriers such as flydubai and Kuwait's Jazeera Airways.

The company has earlier announced a 6 per cent cash dividend for shareholders. Air Arabia shares closed 2.5 per cent lower on the Dubai bourse Sunday prior to the results. – Reuters & TradeArabia News Service