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Wed 4 Mar 2020 02:24 PM

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Flydubai chief bemoans Boeing 737 grounding despite 2019 profit

CEO Ghaith Al Ghaith says interim settlement agreement reached with Boeing for compensation due to the grounding

Flydubai chief bemoans Boeing 737 grounding despite 2019 profit

Eleven Boeing 737 MAX 8 and 3 Boeing 737 MAX 9 aircraft remain grounded, with 19 percent of its flying schedule cancelled as a result of the grounding.

Flydubai returned to profit in 2019 but the outlook is uncertain due to the continued grounding of the Boeing 737 aircraft which hinders its plans for growth, CEO Ghaith Al Ghaith said on Wednesday.

Eleven Boeing 737 MAX 8 and 3 Boeing 737 MAX 9 aircraft remain grounded, with 19 percent of its flying schedule cancelled as a result of the grounding.

While Flydubai reported total annual revenue of AED6 billion ($1.6 billion), a decrease of 2.6 percent compared to 2018, profit rose to AED198.2 million as it carried 9.6 million passengers last year.

Al Ghaith 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.”

He added that Flydubai has concluded an interim settlement agreement with Boeing for certain compensation due to the grounding of the Boeing 737 MAX. 

The details of the interim settlement agreement remain confidential but it has contributed towards this year’s results, he said, adding that it "in no way can it compensate for the loss of business opportunity or market share experienced by the airline".

The grounding followed the crash of Ethiopian Airlines Flight 302 in March 2019, killing all 157 people aboard.

Fuel costs were 25.8 percent of total annual operating costs mainly due to a drop in the average price of jet fuel by 9 percent while ancillary revenue comprising baggage, cargo and inflight sales contributed 8.9 percent of revenue compared to 9.4 percent in 2018.

Looking ahead to 2020, the airline said its ability to launch new routes and add frequencies will continue to be severely impeded due to the grounding.

"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,” it added.

Construction of Flydubai’s new head office is underway and is due to be completed later this year, the airline said.

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