Flydubai CEO Ghaith Al Ghaith said the carrier faced major issues with rising price of fuel
Flydubai CEO is confident the Dubai carrier will return to profit this year, after rising fuel costs saw it report a $43.5m annual loss for 2018.
The low-cost airline posted a 12.4 percent rise in revenue – reaching $1.7 billion for the year – but the total annual operating cost included a price impact of $112 million in fuel costs, which impacted significantly on its ability to make a profit.
The airline also faced financial headwinds in the form of rising interest rates and unfavourable currency exchange movements.
“You cannot ignore that the fuel prices were going up, so we as an airline introduce things like fuel surcharges to cover the fuel to cover costs and I think that definitely helped improve the yield,” Al Ghaith told local radio station Dubai Eye.
“But unfortunately, our fuel bill year on year has gone up by about AED400 million-plus. We could not recover all of it in the price adjustment that we had to because unfortunately in our business the ticket is sold ahead of time and usually the market does not respond quickly enough to the adjustment in fuel price increases.”
The airline did improve its financial performance in the second half of the year, as it focused on further efficiency programmes across the business, which Francois Oberholzer, chief financial officer of Flydubai, said “is expected to result in an improvement to our financial performance.”
The airline’s increased revenue was based on the new routes it launched and an improving yield, Al Ghaith said.
“The main driver for this [increased revenue] is we’ve introduced new routes that matured at a faster rate than one would expect. The second thing is our continuous effort to improve our yield price, so it was a combination of an improvement in yield and growth with the new markets,” he told the radio station.
“We are very confident in 2019, based on what we have seen so far, as far as the fuel prices are concerned, if it continues to be the same, I think we will be alright, [and] we will be successfully making profit this year.
"The routes that have been introduced will mature even more and we will continue to receive more of our new [Boeing 737] Max aircraft which on paper are 15% more efficient than the older model of the aircraft. These are all positive points that will help us this year to get back on track.”