Flydubai is now region's biggest low-cost carrier

Flydubai has become the region’s largest low-cost carrier (LCC) in terms of number of aircraft and is set to reach 200 planes, according to Centre for Asia Pacific Aviation (Capa).

“Flydubai has become the largest low-cost carrier in the Middle East. Its fleet of approximately 40 737s will grow to 61 before beginning the process of replacement, with some growth, by 75 737 MAX 8s. But Flydubai is considering the possibility of a long-term plan to grow its fleet to 200 aircraft, a sum that could see it have more aircraft than Etihad Airways. Although this represents more than a quadrupling from Flydubai’s current size, it is not a vision difficult to see,” Capa said in a note about the Dubai-based carrier.

The LCC is flying 41 aircraft while its Sharjah-based Air Arabia’s fleet consists of 34 Airbus A320 aircraft and an order of 44 Airbus A320.

Capa said that in order to realise the goal of reaching 200 planes, the Dubai carrier need to grow connections, which accounted for 25 per cent of traffic in 2013, almost the opposite of Emirates’ approximately 80 per cent connections and 20 per cent local traffic.

Flydubai had an atypical birth with an order for 50 737-800s at the 2008 Farnborough airshow before its launch in 2009-end, it said.

Capa said 50 aircraft are set for delivery through 2015, and will be supplemented with a further 11 737-800s that were ordered at the November 2013 Dubai Airshow. These aircraft are for bridge requirements until Flydubai receives its first 737 MAX 8 in the second half of 2017. As part of the same order at the Dubai Airshow, Flydubai ordered 75 737 MAX 8s with options on a further 25. The 75 firm orders are due for delivery until 2023 and are planned to replace the 737-800s on a one-for-one basis, meaning the firm orders also include growth.

In order to fund its growth and expansion, Flydubai is reportedly launching a benchmark dollar sukuk and has chosen seven banks to arrange meetings with investors in Asia, Middle East and Europe.

The combined fleets of Emirates and Flydubai, according to Capa, mean some 500 aircraft in the middle of the next decade could be based in Dubai. The figure could swell to 600 – and beyond – towards the end of the 2020s.

The think-tank advised that there are sufficient opportunities for Flydubai to remain content, at least for now, to maintain a single hub at its home of Dubai rather than bases elsewhere in the Middle East.

Focus on liberalisation and Indian Subcontinent

The aviation think-tank said Flydubai should consider establishing codeshares and grow interlines in order to grow further.

Capa suggested that liberalisation in the aeropolitical environment is key for Flydubai to reach its 200-plane goal with not just from India but also from Pakistan and Iran, where access is also constrained.

“Flydubai notes that despite approaching 50 aircraft, in many markets it is barely scratching the surface of opportunity. In India, home to a billion people, Flydubai prior to April 2014 had only nine weekly flights across three destinations. Something of a breakthrough in air service access will see Flydubai have 29 weekly flights in March 2015. India holds much potential, and Flydubai believes it could easily quadruple its presence in the country. Flydubai is the smallest carrier in the UAE-India market with about 20-25% the capacity Air Arabia offers,” Capa said.

Last month, Flydubai launched its inaugural service to Indian commercial capital Mumbai. The carrier has announced flights to a number of new destinations in Asia, Africa, Central and Eastern Europe and Central Asia this year. By the end of October 2014, it was flying to over 85 destinations.

“Flydubai is also small in Pakistan, where it serves three destinations but could grow that to 11 with frequency increases on existing routes. Flydubai also sees itself being under-exposed in Iran,” the Centre for Asia Pacific Aviation said.

Outlook bright

Flydubai’s 2014 growth will be subdued due to the Dubai runway works that forced the carrier pull back its schedule in May, June and Jul 2014, Capa said, adding that it also deferred delivery of new aircraft that were to arrive shortly before the runway works as these aircraft would have been under-utilised. Flydubai technically took delivery of these aircraft but leased them to Ryanair for a handful of months.

 “2015 will see a full-year of growth in every month in addition to a full-year impact of having business class. Load factor improvement will be one metric to watch for the short-term. Flydubai's long-term outlook is bright, especially if it is able to mount a sizeable transformation from mostly local passengers supplemented by intra-Flydubai connections, to a network LCC with extensive partnerships,” it added.

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