Flydubai expects stronger H2 growth
Flydubai started twice-weekly flights to Sylhet on March 15.
Published: Mon 28 Aug 2017, 4:57 PM
Last updated: Thu 31 Aug 2017, 11:29 AM
Low-cost carrier flydubai reported on Monday 9.9 per cent jump in revenue in the first half, and predicted a stronger second-half fuelled by increased operational efficiency and capacity boost with the induction of Boeing 737 MAX 8 aircraft.
First-half revenues rose to Dh2.5 billion as the airline contributed 19.4 per cent to the total traffic growth at Dubai Airports. During the first six months of 2017, flydubai contributed 12.4 per cent of all traffic in Dubai.
Passenger numbers increased to 5.4 million, up 10.5 per cent compared to the first six months of 2016, but the airline reported a loss of Dh142.5 million.
The number of passengers carried per departure saw an increase of 13.7 per cent compared to the same 2016 period, the airline said in a statement.
"The increase in passenger numbers reflects the strength of flydubai's network connecting previously underserved markets to Dubai. The number of Business Class passengers carried per departure saw an increase of 22 per cent compared to the same period last year," it said.
The Dubai-based carrier said while its overall market share grow, it has been offset by the price performance determined by the market. The airline also faced comparatively higher fuel expenses with fuel costs accounting for 24.8 per cent of operating costs compared to 23.5 per cent in the previous reporting period. In addition, the airline added eight aircraft to its fleet since July 2016.
Ghaith Al Ghaith, CEO of flydubai, said the airline would continue to manage its cost performance and balance it with a long-term view of the air travel potential in the region. "We know that we need to remain flexible to the market dynamics across our network. We will continue our disciplined approach to increasing capacity whilst pursuing our broader goal of firmly establishing flydubai at the centre of the global travel industry," said Al Ghaith.
Flydubai is the first airline in the Middle East to take delivery of the Boeing 737 MAX 8 aircraft. "During the next six months we will see the new Boeing 737 MAX 8 aircraft bring greater operational efficiency to our fleet. We will open up previously underserved destinations on our network, see more passengers travel with us and continue to invest in the future growth of the airline," said Al Ghaith.
Aviation analyst Saj Ahmad from Strategic Aero Research said the impact of higher regional capacity across all airlines has forced operators to slash fares, and consequently the erosion of yields has led to worsening margins. "Flydubai however has managed to weather the overcapacity storm better than most. The airline can look to the second half of 2017 as a game-changing environment. Inducting the first of its new fuel efficient 737 MAX 8s will help curtail fuel costs while the Dubai Air Show will provide a much needed fillip in demand as visitors and delegates make their way to the city."
Ahmad said bringing down unit costs is key for flydubai. Revenue increased by almost 10 per cent. So it is evident that the airline has scope to push down harder on costs, despite the challenging price backdrop. "As with 2016, flydubai is primed to turn around its losses before its reporting year ends in early 2018."
Arbind Kumar, senior vice president, Finance of flydubai, said during the first six months, the carrier has seen pressure on both yield and cost.
"We continue to focus our efforts on three key areas: improvement in our cost performance, a broadening of our distribution and optimisation of our network. Knowing that we have faced a similar seasonality and trend in previous years, we will move ahead cautiously but strong in the knowledge that there remains much untapped opportunity," said Kumar.
Flydubai's closing cash and cash equivalents position including pre-delivery payments for future aircraft deliveries, remained robust at Dh 2.1 billion.
During the first half of 2017, flydubai took delivery of the last of the next-generation Boeing 737-800 aircraft. The average age of the fleet is 4.0 years and this underscores flydubai's strategy to operate a young and modern fleet.
Flydubai started twice-weekly flights to Sylhet on March 15, increasing to six flights per week in May. For the first time, flydubai launched flights for the summer season to Batumi in Georgia, Qabala in Azerbaijan and Tivat in Montenegro. flydubai has been operating flights to Russia since 2010 and will further expand its network to 10 destinations. Twice weekly flights from Dubai to Makhachkala and Voronezh will operate from the end of October 2017. In addition, flights from Dubai to Ufa, operating three times a week, will be re-launched on October 31.