Flydubai losses widen amid yield, cost pressures

Flydubai reported a 10.5 percent increase in passenger numbers during the first six months of this year. (Reuters)

LONDON: Flydubai on Monday reported a loss of 142.5 million dirhams ($38.8 million) in the first six months of the year, weighed down by the twin pressures of falling yields and rising costs.
The airline’s losses for the period grew by 58.5 percent compared to the same period last year, when it reported a half-year loss of 89.9 million dirhams.
Revenues hit 2.5 billion dirhams, however, marking an increase of 9.9 percent compared to the first six months of last year. Passenger numbers rose to 5.4 million during the reporting period, an increase of 10.5 percent.
“The increase in passenger numbers reflects the strength of Flydubai’s network connecting previously underserved markets to Dubai,” the airline said. “The number of business class passengers carried per departure saw an increase of 22 percent compared to the same period last year.”
Ghaith Al-Ghaith, chief executive of Flydubai, said the demand for travel remains strong.
“We will however continue to manage our cost performance and balance this with our long-term view of the potential for air travel in the region,” he said.
Arbind Kumar, senior vice president for finance at Flydubai, said “pressure on both yield and cost” weighed on the airline during the first six months of the year.
“We continue to focus our efforts on three key areas: improvement in our cost performance, a broadening of our distribution and optimization of our network,” Kumar said. “Knowing that we have faced a similar seasonality and trend in previous years, we will move ahead cautiously but strong in the knowledge that there remains much untapped opportunity.”
Saj Ahmad, chief analyst for London-based Strategic Aero Research, said that there were some bright signs in the Flydubai results, despite the deeper losses.
“Despite reporting a loss of around 142 million dirhams, Flydubai has demonstrated some positivity in its earnings. The impact of higher regional capacity across all airlines has forced operators to slash fares, and with it, the erosion of yields has led to worsening margins,” Ahmad told Arab News.
“Weathering overcapacity better than its rivals, Flydubai still managed to contribute to almost 20 percent of traffic at Dubai International Airport, cementing its place as the second biggest operator at the airport. Flydubai also saw business class passengers grow on each flight by 22 percent over the same period a year ago while carrying almost 14 percent more passengers per departure.”
Ahmad also pointed to the upcoming delivery of the Boeing 737 MAX 8 to Flydubai in December, when the airline is set to become the first regional customer of the aircraft.
“Flydubai can look to the second half of 2017 as a game-changing environment. Inducting the first of its new fuel-efficient 737 MAX 8s will help curtail fuel costs,” Ahmad said.
“Bringing down unit costs is key for Flydubai. Revenue increased by almost 10 percent, so it’s evident that the airline has scope to push down harder on costs, despite the challenging price backdrop. As with 2016, Flydubai is primed to turn around its losses before its reporting year ends in early 2018.”