After having suffered from the worldwide grounding of the Boeing 737 MAX jets that have been on the ground for nearly a year now, flydubai’s latest earnings report reveals a return to form – at least in terms of profitability.
According to the earnings report, the following were the highlights of the 2019 fiscal year:
- flydubai reported total annual revenue of AED 6.0 billion ($1.6 billion) compared to AED 6.2 billion ($1.7 billion) last year; a decrease of 2.6% compared to the same period the previous year
- Reports a profit of AED 198.2 million ($53.9 million)
- flydubai concludes an interim settlement agreement with Boeing
- Carries 9.6 million passengers, compared to 11 million last year
- Fuel costs were 25.8 % of total annual operating costs mainly due to a drop in the average price of jet fuel by 9%. The efficiency gains expected from the Boeing 737 MAX have not been realised with the continued grounding.
While the company saw an uptick in profitability and enjoyed cheaper fuel costs, which have long put pressure on profit columns, overall revenue and passengers carried lagged behind last year. This is because 19% of its flying schedule was cancelled as a result of the 737 MAX grounding. As a result, revenue dropped 2.6%, while the number of passengers carried dropped around 13%.
Ghaith Al Ghaith, Chief Executive Officer at flydubai, commenting on flydubai’s 2019 annual results, said: “We have 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.
“Whilst 2019 has seen a return to profitability it does not reflect the loss of market position and the unfilled opportunities flydubai could have exploited.
“We have concluded an interim settlement agreement with Boeing for certain compensation due to flydubai in relation to the grounding of the Boeing 737 MAX. This agreement has contributed towards this year’s results, but in no way can it compensate for the loss of business opportunity or market share experienced by the airline.”
Things could have been worse. However, and according to Saj Ahmad, Chief Analyst at StrategicAero Research, flydubai “still managed to robustly cope with demand thanks to its extensive network and brand loyalty.”
“With just a 2.6% reduction in revenue over the previous year to AED 6bn, flydubai’s ability to mitigate and flex it’s schedule and network around the 737 MAX grounding demonstrates how well the airline has coped whilst being restricted in capacity growth,” he told AMEinfo.
He continued: “Flydubai will not have realised the benefits of the MAX, either from fuel savings or fleet expansion, but with yield on the rise and a stronger cash balance as a result of not having to pay airplane delivery payments, the airline is well positioned to monetise its demand, especially since it still is in the throes of aligning its network to Emirates.
“Furthermore, 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% and therefore prevent yield erosion.”
Late last year, Emirates Airline president Sir Tim Clark came out and said that the grounding of the Boeing 737 MAX is “compromising” the growth of flydubai. Today, flydubai is the Middle East largest operator of 737 MAX planes, and the second in the world, with a backlog of 250 jets. Their total order is worth $27 billion.
As for 2020, outlook is uncertain, as illustrated by the final statement on the earnings report. The top concern for the airline besides the 737 MAX grounding is certainly to be the Coronavirus outbreak.
“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.”