Exclusive: Flydubai CEO On The Low Cost Airline’s Meteoric Rise

As the UAE’s second LCC (low-cost carrier) reaches the milestone of its fifth birthday, the airline has much to celebrate.

Just last month, government-owned flydubai was recognised as being “the world’s most innovative and influential LCC” by aviation analysts Centre for Asia Pacific Aviation (CAPA).

“With a fleet of some 40 737s, flydubai recently became the Middle East’s largest LCC and has laid out an aggressive long-term plan to more than quadruple in size,” said CAPA executive chairman Peter Harbison.

“It has successfully built a presence in smaller markets previously not served to Dubai. flydubai has established exceptional levels of staff productivity, even by LCC standards, and built solid ancillary revenue streams that have flowed into rising levels of profitability. A successful hybrid product strategy has also boosted yields.”

This year flydubai broke new ground by opening its business class lounge at Dubai International Airport, to complement its recently added business class flight offering.

Between August last year and the end of this year, the airline has received delivery of 15 new aircraft, all configured with business class seating. The unlisted airline also launched 23 new routes in 2014, breaking its 2011 record of 21 routes launched in one year.

All these positive developments paved the way for an oversubscribed round of funding in November. Dubai Aviation Corporation said that its $500 million debut sukuk was oversubscribed over six times, indicating strong investor appetite.

The proceeds will be used for general corporate purposes and refinancing. “The high-quality and diversified order book enabled flydubai to price the transaction at a very tight spread, after two price revisions,” the company said.

About 64 per cent of the orders for the flydubai sukuk came from investors in the Middle East, while 25 per cent of the orders came from European accounts, indicating a diversified order book.

Flydubai, which started operations in June 2009, made a net profit of $14 million in the first half of this year, according to Reuters. Revenue in the period was $515 million, up 17.1 per cent on the same six months of 2013.

The CAPA report added that 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.

“As flydubai records its fifth full-year of flying, it is apparent 50 aircraft is not enough and that 200 could be achievable with significant work, and a hoped for relaxation of bilateral limits in key markets.”

But what better way to gain an insight into flydubai’s plans than from the man himself?

Ghaith Al Ghaith, CEO, flydubai gives us his perspective on how the little big airline is spreading its wings.

Flydubai recently became the fastest growing startup airline in the world. What has fueled this rapid expansion and growth?

One of the key factors for our success is our ambition to challenge and transform the regional sector by doing things differently and offering a different way of travelling. We operate brand new aircraft, invest in new technologies, employ highly trained staff, and continue to open up underserved destinations.

We remain focused on offering passengers greater choice, convenience, and comfort. It is important to note, however, that our success would not have been possible without the government of Dubai’s vision and commitment to transforming Dubai into a global centre for aviation, trade and tourism. We make it our priority to listen to our customers, and it was based on their feedback that we began to implement our business class service.

You just started a new route into Mumbai, India. Will you continue to strengthen your routes to India?

As an airline, we see great opportunities in India, which we consider a key growth market that continues to present demand for leisure and business travel to and from the region. With the recent addition of Mumbai, we now have a total of seven destinations in India with 25 flights a week and we hope to be able to continue to strengthen our offering to this market.

Do you feel you currently have enough planes in your fleet to meet demand going forward?

Our current fleet consists of 42 Next- Generation Boeing 737-800 aircraft from an order of 50 placed at the Farnborough Airshow in 2008. This year we have taken delivery of seven aircraft with one more to be delivered by December. The remaining will be delivered by the end of 2015.

We placed a $8.8 billion order for 75 new aircraft and deliveries will be over a six-year period between 2017 and 2023. The order also includes 11 737-800s and purchase rights for an additional 25 737 MAX 8. For now, this is sufficient to meet our projected demand, however, we continuously review our growth plans.

Let’s talk about route expansion. Which routes will you launch in 2015? Are there certain routes you are bullish on?

We have launched 23 new routes so far in 2014 and we now serve 86 cities in 45 countries across our network. In 2015, our focus will continue to be on opening up new direct air links to Dubai from previously underserved markets, as well as adding frequency to existing routes.

Opportunities still exist for us to launch new routes and increase the frequency of flights to a number of destinations within our flying radius from Dubai, particularly in East Africa, Central and Eastern Europe and the Indian subcontinent.

Do you have plans to establish any more interline agreements?

Yes. We are always exploring ways to enable passengers and customers to connect and transport goods across our network. We have interline agreements across both our cargo division and passenger services which provide opportunities for onward travel to more than 200 destinations and the option to ship goods beyond flydubai’s network.

It would be interesting to know if you will focus on point-to-point routes in future?

Point-to-point traffic remains an important part of our business. We are however seeing an increasing number of passengers connecting across our network. The launch of flights to Bujumbura and Entebbe also offers passengers the option to travel between these two destinations.

Our network allows passengers from across our network, particularly Russia and Central and Eastern Europe, to visit these destinations, along with Sri Lanka and the Maldives, which are popular destinations. We will continue to monitor the market dynamics to further develop our strategy and network in a way that supports our passengers’ needs.

Would flydubai ever consider creating more hubs?

Dubai is our home and we remain focused on supporting travel, trade and tourism to and from the city. In the context of the Middle Eastern aviation market, flydubai has been the standout newcomer.

What is the biggest challenge when running a start-up airline?

The aviation industry is complex and faces a number of challenges. Fuel costs made up 39.5 per cent of our total operating costs in 2013, yet we are fortunate to be based at Dubai’s global trade, travel and tourism hub, with an infrastructure that gives us the means and environment to flourish as a business. As an airline, we remain focused on ensuring that all areas of our business are as efficient as possible.

On the regulatory and policy front, how will further liberalisation of the skies benefit flydubai?

Open skies policies and removing barriers to travel has certainly supported the growth of flydubai and the region’s aviation industry, which has also contributed to the development of trade, tourism, and travel as a whole. In the UAE, for instance, 46 nationalities are now eligible for visa on arrival, which has improved peoples’ ability to travel freely, thus increasing significantly passenger traffic to Dubai.

What is your overall outlook for growth in the Gulf markets in the next five years?

We expect to see continuing growth and diversification across the GCC region, and we think sectors such as aviation, tourism, trade and logistics will continue to play an increasingly important role.