737 MAX grounding hits flydubai results

GROUND REALITIES: Flydubai reported a loss of Dh196.7 million in H1.

Low-cost carrier flydubai said on Monday that its first half financial results had been significantly impacted by Boeing 737 MAX grounding as airline remains committed to minimising disruption to its passengers.
The Dubai-based carrier reported first-half loss of Dh196.7 million, a 38 per cent reduction when compared to the first half of 2018.
In a statement, the airline said total revenue remained unchanged from the same six-month period at Dh2.8 billion although passenger numbers dropped to five million during the first six months of the reporting period, a decrease of 7.5 per cent as a result of the reduction in capacity.
Ghaith Al Ghaith, chief executive officer at flydubai, said the carrier's performance has been significantly impacted by the grounding of the Boeing 737 MAX aircraft and the half-year results are not representative of what it had expected to report.
"We were expecting a significantly improved performance. We had reported in our 2018 full-year results that we were cautiously optimistic at the start of 2019.  We had seen positive results as our routes matured and during the first few months of the year we saw strong demand across the network," he said.
"In our 10th Anniversary year, we had expected to grow our fleet and continue with our plans to expand our network. Without any deliveries of new aircraft and no visibility of the timelines, we will see our operating fleet reduce in size to what it was in 2014. This is disappointing. We are in ongoing discussions with Boeing, as our long-standing partner, to resolve the unprecedented nature of this grounding and the significant impact it has had on our business and growth strategy. If the grounding continues until the end of the year we expect our performance to continue to be impacted," said Al Ghaith. Francois Oberholzer, chief financial officer at flydubai, said in light of the grounding the carrier had taken every effort to minimise flight cancellations and maximise revenue opportunities.  
"Unavoidably, this led to a reduction in available seat kilometers (ASKM) by 14.9 per cent which meant that we were not able to fully exploit demand opportunities. The cost efficiency programmes, we introduced at the beginning of the year, have yielded the planned benefits with the exception of the fuel efficiencies from the MAX deployment plan.  These programmes were never intended nor could have offset the financial impact of the grounded Boeing 737 MAX aircraft," said Oberholzer.
Saj Ahmad, chief analyst at London's StrategicAero Research, said flydubai's financial performance echoes that of every other airline impacted by the global grounding of the 737 MAX fleets.
"The decline in revenue as well as passenger numbers in tandem with a reduction in capacity has negatively affected flydubai's results. The key takeaway is that while revenues were flat, it's promising that they didn't decline so clearly both demand and yield are holding up, despite flydubai not being able to capitalise on organic growth as a result of the 737 MAX fleet being stood down," he said.
Lower fuel costs too have helped flydubai to sustain its operations as the sharp 17.3 per cent decline has lowered expenditure while it's flexible hedging strategy means that the airline isn't locked into long term fuel pricing that could have adversely affected their bottom line," he said. - issacohn@khaleejtimes.com
 

Issac John

issacjohn@khaleejtimes.com