Flydubai calls on India to open airports to foreign carriers
NEW DELHI // Flydubai wants India’s new government to open up more secondary airports to foreign airlines.
“Whatever we hear about the new government it is about pro-opening up; in the dictionary of our business it means more flights, more access to people, and especially in India the smaller airports,” Ghaith Al Ghaith, the chief executive of the discount carrier, said yesterday in New Delhi on the launch of its new routes.
“We are always giving the push [to increase the number of flights] but air traffic rights is not what we influence.”
He expects to meet Indian civil aviation ministry officials once the new cabinet of Narenda Modi, the country’s new prime minister, has settled in.
Earlier this year, Dubai and India said they would liberalise bilateral air services agreements, according to Capa Centre for Aviation. That would increase Dubai carriers’ weekly seats to India to 66,284 by summer of next year from the current 55,000.
“Securing [seat] increases has been a delicate matter of government negotiation between the UAE and India,” said John Strickland, the director of London-based JLS Consulting.
This year, flydubai has introduced two more routes to India – Kochi and Trivandrum – that will bring the total number of destinations it flies to in India to six, increasing its seats by 1,177 a week.
The number of flights to India per week will be 28, up from 18 with the three new cities.
The airline has rights to operate 5,180 seats per week to the country but is utilising 3,441 seats. The rest needs to be operational by next March.
Of all the points in India, the capital city is the only primary airport it flies to. India has seven primary airports, and 35 secondary airports.
With Dubai hosting Expo 2020 and the hospitality sector expected to boom, more connections to India’s secondary cities would open up Dubai’s job market to these new regions, said Sudhir Sreedharan, flydubai’s senior vice president for commercial operations for the Indian subcontinent, Gulf and Africa regions.
“Demographics of the country is not being tapped to the fullest,” he said. “[Increased connectivity] would also help attract more foreign tourists and investment to the country.”
Currently, flydubai’s fastest growing region in terms of number of flights is the Arabian Gulf, with Saudi Arabia leading the way, and former Soviet countries. Only 5 per cent of its total number of flights is in the India sector.
India is Dubai’s second trading partner after China, with trade touching Dh26.3 billion in the first quarter, or 8 per cent of Dubai’s total foreign trade.
Last year India was Dubai’s top trading partner, accounting for a 10 per cent share of the emirate’s foreign trade, or US$37 billion. China was a close second at $36.7bn.
India is also a growing market for airlines, especially low-cost carriers.
The Malaysian low cost airline AirAsia started operations last month and India’s SpiceJet has slashed domestic sector prices since then. The Dubai carrier does not expect the price war to affect it.
“Let the airlines decide what is the right capacity,” Mr Al Ghaith said. “I don’t think we should worry about the prices; the airline has to make the rational decision on what price to charge.”
The Indian market, however, is price-sensitive and heavily served, analysts say.
“Airlines have little choice therefore but to compete on price,” according to Mr Strickland. “They therefore have to be confident that their cost structure can support the price competition profitably.”
Flydubai expects to take the total number of destinations it will fly to globally above 80 by the end of the year from the current 74.
It will start flying to Kandahar on July 25 with two flights a week.
The Dubai carrier ordered 75 Boeing 737-8 Max jets in November and 11 Boeing 737-8 at $8.8bn with 25 options.
These will start deliveries in 2016 with the first 737-8 Max arriving in 2017. The airline has 36 aircraft in its fleet, and will have 50 next year. Of these, 43 have been financed.
“We can handle the funding and we can handle even more,” Mr Al Ghaith said.
Flydubai has used aircraft sale and leaseback arrangements and bank loans to finance the purchases, but it said earlier this year it will look into issuing bonds next year.
“And it might come in the first quarter of next year,” said Mukesh Sodani, the company’s chief financial officer.
“Currently, low-cost carriers have penetrated only 13 per cent of the aviation market in Middle East, so the growth potential is huge,” he said. In Europe and the United States, the figure is above 30 per cent.
Follow us on Twitter @Ind_Insights
Published: June 9, 2014 04:00 AM