Flydubai narrows first-half loss despite Boeing 737 Max ban

Continued jet grounding to set airline's operating fleet back to 2014 levels

A Flydubai Boeing 737 Max. The carrier managed to reduce its losses despite the grounding of its fleet of the re-engined narrow body jets. Bloomberg

Flydubai reported loss in the first half of the year, joining a growing number of global airlines facing financial pressure from the Boeing 737 Max grounding, and warned the continued ban may impact its performance. .

Flydubai reduced its loss by 38 per cent year-on-year to Dh196.7 million in the first six months of the financial year ending September as its fuel bill shrank and it introduced cost efficiencies at the start of 2019 that have yielded benefits but not enough to offset the impact of the Max grounding.

Costs for jet fuel dropped by 17.3 per cent as oil prices fell and capacity reduced but savings were not fully realized as the company operated the older Boeing 737-800 aircraft on longer routes.

The low-cost airline, the world's second biggest customer of the 737 Max, expects its fleet to shrink to 2014 levels as the jet remains grounded and lease contracts on older planes expire, the company said on Monday.

"This is disappointing," flydubai chief executive Ghaith Al Ghaith said. "We are in ongoing discussions with Boeing, as our long-standing partner, to resolve the unprecedented nature of this grounding and the significant impact it has had on our business and growth strategy."

Flydubai idled 14 of its Max jets from an order of 250 in March after the model was involved in fatal crashes in Ethiopia and Indonesia that prompted a worldwide grounding. In April the airline's chairman Sheikh Ahmed bin Saeed said the carrier is seeking compensation from the plane maker and could switch to the rival Airbus A320 Neo narrow-body. Boeing still expects the Max to fly in the fourth quarter of this year, though the UAE aviation regulator said its return to commercial service was unlikely before 2020.

Flydubai carried 7.5 per cent less passengers this year, serving 5 million people, as capacity fell by 14.9 per cent. The airline returned five jets to lessors during the first half of the year and plans to return four more by the end of the year, further reducing capacity.

"If the grounding continues until the end of the year we expect our performance to continue to be impacted," Mr Ghaith said.

The chief executive said flydubai had seen positive results in the beginning of the year with "strong demand" across its network.

"Our performance has, however, been significantly impacted by the grounding of the Boeing 737 Max aircraft and our half-year results are not representative of what we had expected to report. We were expecting a significantly improved performance," Mr Al Ghaith said.

Other international airlines such as Southwest Airlines and Norwegian Air have also highlighted financial and operational pressure from the ongoing 737 grounding.