Flydubai returns to profitability

Dubai's low-cost airline flydubai reported on Wednesday a return to profitability in 2019 despite its growth strategy getting significantly impacted by the grounding of the Boeing 737 MAX.
The carrier generated an annual revenue of Dh6 billion in 2019 compared to Dh 6.2 billion (in the previous year, a decrease of 2.6 per cent.
Ghaith Al Ghaith, chief executive officer at flydubai, said the carrier had to manage a number of unprecedented issues faced by the aviation industry.
"Our results demonstrate that we have capitalised on the strong fundamentals in our business, but it is regrettable that our growth strategy has been significantly impacted by the grounding of the Boeing 737 MAX," said Al Ghaith.
"While 2019 has seen a return to profitability it does not reflect the loss of market position and the unfilled opportunities flydubai could have exploited," he said.
Al Ghaith said flydubai had concluded an interim settlement agreement with Boeing for certain compensation in relation to the grounding of the Boeing 737 MAX. The details of the interim settlement agreement remain confidential.
Francois Oberholzer, chief financial officer at flydubai, said direct operating costs were reduced by 17.8% per cent, while there was double-digit growth in yields minimising the reduction in revenue to 2.6 per cent compared to a fall in capacity of 15.8 per cent. "Furthermore, we successfully refinanced our debut 2014 Sukuk during this financial year."
The 11 grounded Boeing MAX aircraft will not rejoin the operating schedule until regulatory approval has been received from the General Civil Aviation Authority and the regulatory authorities in the jurisdictions where the airline flies, the airline said.
"The preparation for this year's outlook statement is challenging given the uncertainty around the timetable for the return to service of the Boeing 737 MAX aircraft and the subsequent aircraft delivery schedule. With a current fleet size of 42 aircraft our ability to launch new routes and add frequencies will continue to be severely impeded. In order to further minimise disruption to our passengers' travel plans we are currently exploring options to extend the term for the lease of aircraft that were due to leave our fleet in 2021," the carrier said in a statement.
Saj Ahmad, chief analyst at London's StrategicAero Research, said going forward, with an earlier Ramadan and no summer impact of runway works that were seen in 2019, flydubai would no doubt take steps to manage capacity against demand with the virus impacting passenger travel patterns. "The fallout has been contained in the GCC thus far, but it's too early to tell whether flydubai will need to stand down any of its current fleet in sizeable numbers for a prolonged period of time."
Ahmad said with capacity restricted and nearly one-fifth of its schedules reduced, flydubai has been able to profitably make the most of its reduced direct operating costs, which fell by almost 18 per cent and therefore prevent yield erosion.
- issacjohn@khaleejtimes.com