Dubai-based flydubai reported its Half-Year Financial Results for the reporting period to 30 June 2018.
Total revenue increased to AED 2.8 billion ($761 million), or an increase of 10.4% year on year (yoy).
Revenue passenger kilometer (RPKM) also grew by 6.5% yoy.
However, flydubai reports a loss of AED 316.8 million ($86.3 million) for the same period.
It said there was a price impact of AED 175 million ($47.7 million) due to a 35% increase in the Average Brent Crude Oil prices compared to the same period last year
Ancillary revenue comprising baggage, cargo, and in-flight sales contributed 11 % of revenue, dropping from 14.6% for the same reporting period.
“With oil reaching almost $80 a barrel, it comes as no surprise that the airline swung to a loss. However, flydubai’s traditional strong second half performance should see the airline recover this and get back into the black,” Saj Ahmad, Chief Analyst – StrategicAero Research, told AMEinfo.
Fuel costs were 29.2% of total operating costs, compared to 24.8% for the same period as last year.
Other airlines have been hit with fuel cost escalation, so flydubai is not isolated in this regard.
Ghaith Al Ghaith, Chief Executive Officer at flydubai, said: We have continued to see a tough trading environment and the Half-Year Results reflect these short-term challenges. We continue, however, to invest in our fleet, network, and operations recognizing opportunity as we look to the future.”
Arbind Kumar, Senior Vice President, Finance at flydubai, said: “The stronger dollar, rising oil price, and higher interest rates are expected to continue to impact our performance and we will need to maintain a tight grip on the deployment of our capacity. The benefits of our investments, aligned to our long-term financial goals, provide a solid foundation for the next phase of development for the airline.”
Route and aircraft review
The airline has undertaken a systematic review of the performance of its network. This has resulted in the cancellation of operations to some destinations as well as investment in the development of other routes to aid their maturity.
In H2, flydubai will take delivery of seven new Boeing 737 aircraft including four Boeing 737 MAX 8. For the first time, Boeing 737 MAX 9 aircraft will join the fleet and three aircraft are due for delivery.
From 11 October, flydubai will launch, for the first time for a UAE national carrier, direct daily flights to Helsinki (HEL). As part of the codeshare with Emirates, flydubai will operate flights to Zagreb in Croatia between 02 December and 30 March 2019.
From December, select flights to 10 destinations will relocate to Terminal 3 at Dubai International (DXB) as Emirates and flydubai continue to work closely together to increase connectivity offering customers unmatched opportunities to travel.
“With the massive investment in 225 New Boeing 737 MAXs, the airline’s financial strength remains healthy. Key to getting back into profit later in the year will be the continued push towards further integration and connectivity benefits with its partnership with Emirates,” said Ahmad.
Under the codeshare agreement, 1.4 million passengers have been jointly carried in H1 2018, according to flydubai.
“83 destinations are available under the codeshare. Key flights moving to Terminal 3 will cut connection times and provide more efficient operations at Dubai International where flydubai now represents over 12% of all flights,” said the carrier.
During the first half of the year, the fleet size remained at 61 aircraft and includes six Boeing 737 MAX 8 and 55 Next-Generation Boeing 737-800 aircraft.
Passenger numbers remained steady at 5.4 million during the first six months of the reporting period.
Statements on Full Year 2018 Outlook
flydubai has awarded a number of contracts for the construction of its new AED 700 million ($190.7 million) headquarters.
Ghaith Al Ghaith, Chief Executive Officer of flydubai, commenting on the outlook for 2018, said: “Although higher oil prices will continue to affect our operating costs and performance in the second half; pricing stability at the current level is also likely to stimulate demand for regional travel.”
He added: “Since the start of the codeshare, significant time and resources have been spent on the network alignment. Coupled with the investments we have made we are well placed to contribute to an increase in connectivity of Dubai’s aviation hub as we see our new route structure mature.”
“With more fuel efficient 737 MAX’s entering the fleet, the airline will begin to realize its benefits sooner rather than later, particularly as it gains from economies of scale across its homogenous fleet,” Ahmad says.
“It’ll take time to fully reap the MAX investment, however, every new jet in the fleet will counteract fuel costs while providing flydubai the option to open up new routes to generate new revenue.”