Flydubai: No small ambition

Dubai earned world acclaim when it became the busiest airport globally for international passenger traffic in 2014 with more than 70.4m visitors.

While astonishing for a small city like Dubai, the numbers seem plausible when one considers the expansion of the city’s main airlines – Emirates and low-cost carrier flydubai.

The bigger airline Emirates’ growth story is apparent but the fast-paced growth of flydubai is equally a major contributor to the emirate’s rise to aviation dominance.

Launched in 2008, soon after the financial crisis, flydubai made its maiden journey to Beirut in June 2009. Six years on, the airline flies to over 90 destinations with plans to reach over 100 by 2016.

“Our strategy is based on two aspects – basically bring the aeroplanes on and max the market up. The target is to add new aeroplanes and new cities,” says chief operating officer captain Kenneth Gile, who has been with the airline since its launch.

A pilot and industry veteran, Gile is speaking to us at Boeing’s 737-production factory in Renton where flydubai’s 49th aircraft is taking shape. He is evidently excited and proud of what the carrier has achieved so far.

The airline became profitable in its second year of operations and reported its first full year of profit in its third year. “Since then we are doing the same thing and I don’t see us changing that,” he says.

Its net profit hit Dhs 250m last year, up 12.3 per cent compared to 2013 with total revenues reaching Dhs 4.4bn.

The low cost carrier has also been expanding rapidly. It added 23 new routes in 2014 and has launched and announced 16 new destinations so far this year. Already flying direct to 57 destinations served by no other airline from the United Arab Emirates, the carrier is now setting its sights on all countries located within six hours of Dubai.

“If you look at where we can travel, within that area there is a minimum of 2.5bn people, which could soon reach 3bn. From when we started, we have only carried about 1 per cent of those people so even if we get it up to 2 or 3 per cent, it is an unbelievable market size,” Gile explains.

Hand-in-hand

While refusing to divulge specific details of cities and countries that the airline is currently targeting, he says flydubai is focussed on bilateral agreements.

“There are several cities we would like to go to as soon as we can achieve that goal. We are looking at India, Pakistan Iran, Africa – if a good market becomes available, we will go to it,” he adds.

Getting bilateral agreements in place is one of the most time-consuming processes for the airline, admits Gile, though he refuses to label it a “problem” or “challenge”.

“Each country is different. And in some cases it takes a lot of work to get the agreements. They release certain number of seats each year and we get in line with other airlines to try and get them. So it’s just a constant process of knocking on the door and getting those agreements to allow us to fly,” the American explains.

The carrier did face problems getting into India and although it now flies to 10 cities in the country, the pace of expansion has been slower than hoped. Similar delays have been experienced in Pakistan and Iran.

“If sanctions are lifted on Iran and the country opens up, it will make a difference – the size of the difference I don’t know. There is a lot of demand,” says Gile. Flydubai began services to Iran only in August last year and already flies to nine destinations.

According to StrategicAero Research. com aviation analyst Saj Ahmad, the biggest challenge that flydubai faces is the congestion at Dubai International Airport and having to wait while Dubai World Central is fully developed.

“A move to DWC is inevitable. If flydubai aims to compete, expand and launch more routes only DWC can give them that additional airspace that they need.

“That’s not to say flydubai may not operate out of both Dubai airports – they certainly could – but I suspect they want to keep things in one place to suppress costs and maximise the additional capacity that DWC will offer,” he says.

The Boeing effect

One of the key facets for expansion is parallel growth in fleet size. Flydubai, which ordered 50 737-800 aircraft in 2008, is set to receive its 49th aircraft later this year in an all-Boeing fleet.

“In a challenging environment, the 737 has been very good and we have seen over 99.7 per cent reliability. The aircraft was also very cost effective and offered better value when we picked it,” says Gile.

The carrier also placed a record $11.4bn order for 100 of Boeing’s new 737 MAX aircraft – including 75 firm orders – and 11 Next-Generation Boeing 737-800s during the Dubai Airshow in 2013.

The MAX is claimed to reduce fuel use and CO2 emissions by an additional 14 per cent over the current most fuel-efficient single-aisle aeroplane and will have a 40 per cent smaller noise footprint. It will also offer the lowest operating costs in the single-aisle segment with an 8 per cent per-seat advantage over its rival, according to Boeing.

The aircraft will have the capability to fly more than 3,600 nautical miles (6,667 km), and will come with the Boeing sky interior, which features new sculpted sidewalls and bigger storage bins.

Boeing began the production process for the MAX in June and delivery to the launch customer, Southwest Airlines, is on track to take place in the third quarter of 2017. Flydubai is also set to take delivery the same year.

“The first 737 MAX delivery to flydubai is on track for the second half of 2017 and the airline will be one of the early carriers to receive the aircraft,” confirms Boeing International Sales senior vice president Marty Bentrott.

The carrier will continue to receive deliveries of the MAX until the end of 2023. Some of the new aircraft will be used to replace old planes – flydubai gives planes back to the leasing company after eight years – while others will be used for expansion.

While Gile asserts that the airline is extremely happy with its Boeing association, he says it may switch loyalties when it next goes to market.

“We don’t have any immediate plans for new orders but anytime we look at purchasing another aeroplane, we would get the competition involved and look at both options.

“We have to do that because products change. One could be the best one this year but there could be improvements later. Also different markets could require different aeroplanes. So you never put yourself inside a strait jacket,” he clarifies.

Overcrowded skies

Flydubai is Dubai’s first low cost carrier but it is not the first in the UAE. Sharjah-based Air Arabia, founded in 2003, has also been extremely successful and continues to expand and grow its network. Across the Gulf Cooperation Council others like Kuwait- based Jazeera Airways and Saudi-based flynas also compete to offer cheaper fares to regional travellers.

This has forced airlines to innovate and offer new products. In 2013, flydubai went down a new commercial avenue with the launch of business class seats in select flights.

“The performance of our business class product has been exceeding our expectations,” says Gile. All of the airline’s new aircraft deliveries will have the option.

“For some people, it’s always about price but other people want a different type of service and will pay for it. People want to upgrade to larger seats and we are just meeting customer demand,” he elaborates.

Ahmad agrees the offering has proven successful move.

“The business class product was unheard of in this market – yet flydubai launched it. It has been a hit with passengers and driven up revenue and yield,” he argues.

While the move did help the airline differentiate itself from its rivals, Gile asserts “there is plenty of market and enough business for everybody”.

He adds: “But how we compete is with our people.”

What next?

In the longer term, flydubai may need to look at the likes of Southwest Airlines and Ryanair to get the best out of its fleet, suggests Ahmad.

“They may have to consider operating out of several GCC/European hubs to penetrate more markets and access new gateways. Relying solely on Dubai for expansion limits their true capability.”

But according to Gile flydubai’s strategy and direction remains unchanged for now. There are no plans for wide-body aircraft and flying longer routes.

“Our goal is to be the best,” he says.