Flydubai targets more than 50% load factor in first year

Dubai's first budget carrier, flydubai, will take to the skies in June with flights to two Middle East destinations – Beirut and Amman – starting on June 1 and June 2, the carrier said yesterday.

Despite the current slowdown in air travel, the low-cost carrier is aiming to achieve load factor of more than 50 per cent, said Chairman Sheikh Ahmed bin Saeed Al Maktoum.

"If we take into account the launch timing of the airline – June, which is a peak time, flydubai should be able to achieve a high load factor by the end of this year. For sure, it would be over 50 per cent. I am not very worried about that at all. I am sure the airline would do very well," Sheikh Ahmed told Emirates Business.

With a total of 54 Boeing 777-800 aircraft worth $4 billion (Dh14.6bn) on order, flydubai will kick start operations with two aircraft due to be delivered in May.

"In May, we would be receiving only the first of the two aircraft, with which we would be launching operations. We would be receiving six aircraft by the end of this year," he said. With that the airline will fly to more destinations this year, he added.

"We would for sure be flying to more than four destinations by the end of this year," said Sheikh Ahmed.

The airline ordered 50 of the planes from Boeing and four from leasing company Babcock and Brown at the Farnborough International Airshow in July last year.

Financing needs

With regards to the airline's plans to raise finance for the purchase of aircraft, Sheikh Ahmed said: "flydubai is facing no difficulty with financing the purchase of the aircraft. The aircraft would be financed from markets. We will finance the 50 aircraft over the coming five years."

He added that the planes would be delivered in the same period.

The airline, established in March 2008 with a start-up capital of Dh250 million, however, has no plans to launch an initial public offering. "For the time being we have no plans to list the company," said Sheikh Ahmed.

Furthermore, the Dubai government-owned airline, though, is being assisted by Emirates in its initial phases. But it has no intention of leasing any aircraft from Emirates. "We are not thinking of leasing any aircraft from Emirates," said Sheikh Ahmed. As for the break-even period, the airline has no specific target in mind, according to Ghaith Al Ghaith, CEO of flydubai.

"We are keen on making money from day one. We are all focused to drive value and make money and we will do it as soon as we can," he said.

Hedging plans

With somewhat stable oil prices at around approximately $50 a barrel at present, flydubai could look at hedging its fuel. Asked if the airline was going to hedge its fuel, Sheikh Ahmed said: "It is possible, but I do not want to say now what we would do exactly. After all, fuel price is very good right now."

Flydubai's Chief Operating Officer, Kenneth Gile, had told Emirates Business in August the airline plans to use a fuel hedging strategy to maintain the lowest fares in the industry.

At that time, volatile fuel prices were putting pressure on budget carriers to raise fares and surcharges.

"We are focusing on implementing a successful hedging plan and Southwest Airline's hedging strategy is something we could look at. We have already started some preliminary processes to develop a hedging plan," Gile had said.

First two routes

Asked why flydubai had chosen just two destinations – Beirut and Amman – as its debut routes, Sheikh Ahmed said: "We have to start somewhere. Besides, in May, we will receive only two planes."

"We chose Amman and Beirut because there is good traffic in the summer season to these destinations. There is also good business we can get from these two cities so we decided to start with these destinations," added Al Ghaith. "The timing of the launch caters perfectly to the important and busy summer season," he added.

Fair fares

With fares starting from as low as Dh250, including taxes, one way on both of its launch routes ex Dubai, flydubai said it would offer a hand baggage allowance of 10 kg. It added that passengers have to pay for the optional extras they choose, such as checked bags of up to 32 kg each, seat selection and any food and beverages.

The airline further said while it would charge the passenger Dh40 for the first check-in baggage, the fee for the second piece of luggage would be Dh100.

The budget carrier, initially scheduled to start flying from Al Maktoum International Airport in Jebel Ali's Dubai World Central development, would now start operations from Dubai International airport's Terminal Two as against the more popular Terminal One.

Explaining the reasons behind choosing Terminal Two over Terminal One, Ghaith said: "It is a new improved terminal and it is a simpler terminal to operate from. More importantly, a low-cost carrier needs a quick turnaround time, and at Terminal Two, we would get a quick turnaround time."

For instance, there are no bridges and so you can load the aircraft basically from both ends.

"Therefore, to drive efficiency into our business, Terminal Two is the ideal one for us," he said.

However, it is likely that the airline will shift operations to Al Maktoum International once it is open for business in mid-2010.

"Yes, it is possible we may shift flydubai's operations to the new airport once it is ready. As the head of Dubai's civil aviation authority, I will always encourage all airlines to look at operating from the new airport in Dubai World Central," said Sheikh Ahmed.

"But for flydubai, it is good right now that it is starting out from Dubai International airport," he added.

Impact on market

Asked if the launch of flydubai would impact the existing full-service carriers in the region, Sheikh Ahmed said: "No. We are talking about two different segments of the market here. It is like, while some people stay in five-star hotels, others stay in three- or four-star hotels. It depends on how much you can afford."

"So I would say that flydubai is a vehicle to ensure Dubai will always remain a destination that would keep attracting an increasing number of people, besides those who reside here, who would be able to afford flying," he added.

With regards to flydubai's target market share in its first year of operations, Ghaith said: "We will add to the market. We do not believe in taking the marketshare."