Press Release

JCR-VIS assigns entity ratings to Shaheen Air International Limited

Karachi, September 23, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/ A-Two) to Shaheen Air International Limited (SAI). Outlook on the assigned ratings is ‘Stable’

Overall passenger traffic in Pakistan has grown at a CAGR of 5.3% over the last five years with air travel reaching 15.1m passengers during FY15. Independent estimates project healthy growth for air traffic and corresponding growth in revenues. The aviation sector is characterized by soft barriers to entry (availability of lease financing), vulnerability to economic downturns and high adjusted leverage & cost structure (fixed, variable and regulatory costs). Accordingly the sector carries a higher business risk. The recently announced national aviation policy has introduced a number of financial and operational requirements (fleet age, flight punctuality & regularity) which while strengthening operating environment may pose a capitalization challenge for existing operators.

The assigned ratings to SAI reflect growing market share, improving financial risk profile and favorable growth prospects. Sustained improvement in competitive positioning vis-à-vis peers in local and international operations and consolidation in financial profile will be considered credit positive. SAI’s marketing strategy as a budget airline and increasing point to point flights gives it wider access to customer base locally and internationally. This strategy would need to be monitored closely with the increasing regional competition in airline business, going forward.

Liquidity profile of the company is considered adequate in view of healthy cash flows in relation to outstanding obligations, matching working capital cycle and liquid assets carried on the balance sheet. Capitalization levels have increased on account of healthy internal capital generation. With growth in equity and repayment of debt, gearing and leverage indicators have witnessed improvement on a timeline basis.

Fleet size has witnessed an increase to 25 and is expected to grow further with the planned induction of 5 relatively new aircrafts in the ongoing fiscal year. With induction of aircrafts of relatively lower fleet age and gradual phasing out of old planes, fleet age is expected to reduce, going forward. Given the increase in fleet size, a number of new domestic and international routes are planned to be introduced. Management of competitive pressures alongwith a sound financial profile would be among the rating drivers, going forward.

For further information on this rating announcement, please contact the undersigned (Ext: 241) or Mr. Jamal Abbas Zaidi at 92-21-35311861-70 or fax to 92-21-35311873.

Mohammed Khalid Ali

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2016 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited