Flydubai posts $53.6m H1 loss as Boeing 737 MAX grounding impacts operations

Dubai carrier flydubai has reported a loss of Dhs196.7m ($53.6m) for the first half of this year as the grounding of the Boeing 737 MAX “significantly impacted” operations.

Despite the MAX impact, the loss was 38 per cent lower than the Dhs316.8m in losses that the airline posted in the first half of 2018.

Passenger numbers dropped to five million during the first six months of the year – a decrease of 7.5 per cent – due to the reduction in capacity, the airline said in a statement.

The 737 MAX was grounded after two crashes – including an Ethiopian Airlines accident in March and a LionAir incident last October – killed a total of 346 people.

Flydubai, one of the largest MAX operators with 250 of the new model narrow-body jets on order, grounded all its 14 MAX jets, accounting for roughly 10 per cent of its fleet.

The airline had to cancel up to 15 flights a day.

Ghaith Al Ghaith, CEO at flydubai, said: “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.

“Our performance has however been significantly impacted by the grounding of the Boeing 737 MAX aircraft and our half-year results are not representative of what we had expected to report; we were expecting a significantly improved performance.”

The airline also reported that total revenues remained unchanged during the first six months at Dhs2.8bn.

Fuel costs stood at Dhs740m in H1, a 17.3 per cent decrease compared to Dhs895m for the same period as in 2018.

However, available seat kilometres (ASKM) stood at 12,877 million, down 14.9 per cent compared to the period ending June 30, 2018.

Francois Oberholzer, CFO at flydubai, said: “In light of the grounding, we have taken every effort to minimise flight cancellations and maximise revenue opportunities. Unavoidably, this led to a reduction in ASKM 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.”

Looking ahead, the airline has been able to negotiate an extension to the lease for two Boeing 737-800 aircraft, which were due to leave the fleet in 2020 and will now leave in 2022.

Flydubai will continue to explore short to medium-term leasing options including aircraft, crew, maintenance and insurance (ACMI), the statement said.

“Effort continues to be made to minimise the disruption to its passengers especially ahead of the seasonal holiday period which is traditionally when the airline sees strongest demand for travel,” it said, adding that it will”optimise its schedule”.

Ghaith Al Ghaith 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.”