Sharjah-based low-cost carrier Air Arabia was cut to "hold" from "buy" by the HC Research, which cited the yield pressures because of excess capacity and competition at a time of rising fuel costs

It said that in spite of vigorous traffic increase previous year, the Middle Eastern carriers like Air Arabia fought to keep their seats filled- a trend predictable to carry on this year, the brokerage, which also decreases its price target on the stock by 12 per cent to Dh1.11.

Furthermore, the airline continues to experience increased competition on UAE-India routes, approximately a third of its traffic, from Indian airlines over the past year as they have been ever more raising their frequencies to get advantage from the strong traffic growth.

The brokerage told, "This implies a strong likelihood of yield pressures extending to the peak summer season where airlines typically make most of their profit."