Exclusive: flydubai CEO Ghaith Al Ghaith talks entry into new markets & more

April 24, 2018 9:36 am

Flydubai Boeing 737 MAX 8

Every business is about making money, and low-cost UAE carrier flydubai is no different.

A closer look at the company which AMEinfo did at this year’s ATM 2018 revealed ulterior motives behind building a successful company: Sharing the spoils with the ones that matter most, the travelers.

We sat down with Ghaith Al Ghaith, CEO of flydubai, who for 30 precious minutes, took us on a high-altitude endearing trip inside the company’s strategic mindset.

From its home in Dubai, flydubai has created a network of more than 90 destinations.

From takeoff to landing, below are the flight details for this journey.

Read ATM 2018: Hyperloop One announces seven-minute Dubai airport-to-airport plans

Launch time

Flydubai had announced 11 new destinations for 2018.

For any airline, anywhere, it’s quite a stunt.

“When we started the airline, the idea was to always be part of the Dubai fabric, and linking the city to the outside world, especially in the surrounding geographic area, at that time around 2.5 million people, which were either not connected, or underserved,” Al Ghaith told AMEinfo.

“A year prior, we launched over 20 additional routes,” AL Ghaith added.

New Exclusive: Can 2018 fuel prices offset “better” year for Emirates Airlines?

The additional routes are a manifestation of the close codesharing partnership flydubai has with Emirates, and while some of these destinations are temporary and ‘summer centric’, others like Catania, Sicily are in secondary markets where big aircraft, like A380 or Boeing Dreamliners will not work.

“But a smaller aircraft will do very well as a route to Dubai, and this becomes passenger traffic which Emirates can then later fly elsewhere on continuing routes,” said Al Ghaith.

“This is it in terms of new routes for the rest of the year, until other opportunities arise.”

Read: UAE-based carrier Emirates ends 2017 on high note

Underserved

Flydubai is keen on fulfilling its main purpose of connecting people who otherwise would have a more difficult, and expensive journey towards their destinations.

“Saudi has quite significant secondary points and we have places we would like to go to like Cairo, (flydubai goes to Alexandria), but it’s not possible because of bilateral agreements preventing us,” said Al Ghaith.

He said that Syria and Yemen are off grid for now for security reasons but Iraq was coming back in force on flydubai radar screens as the company launched flights to Irbil in addition to existing services to Baghdad, Al Najjaf, Basra, and perhaps soon Sulaymaniyah.

flydubai opened up more than 70 new routes that did not previously have direct air links to Dubai or were not served by a UAE national carrier from Dubai.

“But what’s new for us on our routes is our new aircraft, the Boeing 737 Max,” said Al Ghaith.

 Read: Why ‘now is the ideal time to invest in Dubai’s real estate sector’

Max in the mix

In the second half of 2017, 8 new aircraft joined the flydubai fleet including two Next-Generation Boeing 737-800 and six Boeing 737 MAX 8 aircraft, with the carrier now operating a single fleet-type of 61 aircraft.

flydubai will see its fleet grow by up to 296 aircraft over the next decade, including 75 of the Boeing 737 MAX 8 variant for which deliveries will be completed by 2023 as well as 11 of the Next-Generation 737-800 aircraft, all from an $8.8 billion aircraft order placed at the Dubai Airshow in 2013.

“In 2017, we finalized an order to purchase 175 additional 737 MAX aircraft, the largest single-aisle jet order in Middle East history, with a unique range of the MAX 8, MAX 9, and MAX 10,” the company announced during last year’s Dubai Airshow.

Read: What is leading UAE’s $820 billion construction sector?

Reuters reported the 2017 deal is worth $27 billion, including purchasing options for an additional 50 planes.

The deal will more than triple the airline’s current fleet of 61 aircraft, and the carrier will receive the first aircraft of this order in 2019, with the rest of the deliveries scheduled to continue from then until 2029.

The new MAX offers one of the most advanced engines in the world, the LEAP-1B, and with largest ever gains in fuel efficiency, a smaller-than-ever carbon footprint, and trustworthy performance.

“flydubai’s low cost management is to reduce the cost of flying, and owning one type of aircraft, in this case Boeing, does it for us,” explained Al Ghaith.

As the company keeps its aircraft for 8 years, and being its 9th year of operation, flydubai is already retiring aircrafts, while 8 years from now, all of its current aircraft will be retired.

“With MAX aircraft, we have less disruption, low maintenance and 15% more efficiency, so we pass the gains that we have into services for customers or price reductions.”

Al Ghaith explained that fuel is still a challenging factor, for when oil prices were lower, fuel was around 19% of the operational cost as compared to around 25% today.

“We will need to add fuel surcharges, but we are still better off today (at prices in the $70’s range) than when oil was at $120, and we managed that situation well back then,” he said.

Read: flydubai posts robust 2017: Any headwinds for UAE’s top carriers?

Overcoming low yields

For year ending December 31,2017, flydubai turned over $1.5bn compared to $1.37bn a year earlier and made $10.1 million in profits, extending a run of profitability that spanned 5 years.

flydubai carried 10.9 million passengers, up 5.5% from 2016.

“It’s a year where we continued to grow in revenue and passengers but suffered from reduction in yield and we believe it was a reflection of the market conditions,” Al-Ghaith said referring to fuel costs, restrictive bilateral agreements and not so open skies that led to only $10 million in profits.

“Yield were down by 10-12%, so we carried more passengers, but for very little increase in revenue.”

Low cost Air Arabia, from its Sharjah hub announced it had made a 30% profit increase, carried 8.5 million passengers (air Arabia), and made $180 million in profits from revenues of $1bn in 2017.

“I am not analyzing their cost or operation. But I can think of two things: One is they fly more to India than us, having started before us when India was more flexible, a country that does not represent 2% of our market. Second, they have better cost advantages operating out of Sharjah,” argued Al Ghaith.

“What matters is that we need to continue to grow and while their (Air Arabia) revenues declined, our revenues grew with our cost, and having a very competitive market, the yield was affected, but we are working on improving that situation this year,” Al Ghaith continued.

Read: flydubai settles choice for codesharing terminal with Emirates

Codesharing synergy 

The flydubai-Emirates codesharing agreement enjoys certain advantages such as airlines having a common cultural environment, same hub (DIA Terminal 3), and synergy to take more people through Dubai.

Flydubai has 51 routes that Emirates doesn’t fly to, but is this type of travel disruption error-free?

“We are in the business of logistics, and there are always disruptions, but nothing different from what you would see on regular flights, and as our core staff are ex-Emirates, we have a very smooth codesharing partnership going with our partners,” declared Al-Ghaith.

The codeshare arrangement kicked off at the end of October 2017, after a July 2017 announcement.

The two airlines have flown nearly 400 thousand passengers, both carriers announced on Monday, and more than 250,000 have already booked their trips for the year ahead.

From the initial shared flights to 29 cities, the tie-up has quickly expanded to 90 destinations.

“I don’t envision codesharing with anyone else than Emirates,” declared Al Ghaith.

“We never say never, but Emirates has the biggest network, and the volume it brings to our operation is plenty for us.”

Read: Emirates and flydubai announce new “extensive partnership”

Threats 2018

In addition to rising fuel prices rising towards $80 in 2018 being flydubai’s biggest threat, Al Ghaith recognizes two more, the first being regional conflict.

“If it continues we deal with it, but peace brings business,” said Al Ghaith.

“But the second biggest threat for us is that we operate tin a region where traffic rights are restricted like in India, Pakistan and Cairo.

“I want to add more flights especially to and from India, knowing that in Dubai, we have the biggest amounts of seats for Indians, something like 60,000 per week, than any other country.”

An ever-optimistic Al Ghaith is not the least deterred from his company’s mission.

“The airline keeps you young, it’s exciting work and every seat we occupy means we are contributing to the overall economy and health of the country,” Al Ghaith concluded.

Read: What key role is Emirates playing to keep UAE-US open skies open?

 

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Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.



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