Flydubai expects tough year after profit plummets 68%

Capacity will remain flat even as it takes delivery of new aircraft, with an eye on adjusting to capacity in the market and a “challenging operating environment”, according to the company.

Flydubai reported widening losses as costs climb. Jan Seba / Reuters
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The low-cost carrier flydubai reported a 68.6 per cent drop in profit last year and warned of a tough year ahead.

It recorded a profit of Dh31.6 million, down from Dh100.7m in 2015, on revenue of Dh5 billion, an increase of 2.4 per cent.

Capacity will remain flat even as it takes delivery of new aircraft, with an eye on adjusting to capacity in the market and a “challenging operating environment”, according to the company.

The chief executive Ghaith Al Ghaith said the carrier had encountered “a difficult pricing and operating environment”.

He said: “Yields will remain under pressure and we expect to report flat growth in the year ahead.”

Passenger numbers improved during the second half. Flydubai carried 10.4 million passengers last year, up 14.4 per on 2015, with the steepest rises in demand from the Arabian Gulf and the Middle East, followed by Ukraine and the Indian subcontinent.

This year, it will take delivery of new Boeing 737 Max 8 aircraft during the second half.

“An established tourism destination and global centre for business, together with the UAE’s geographic location, has supported the need for increased connectivity,” said Sheikh Ahmed bin Saeed Al Maktoum, the chairman of flydubai.

The carrier had cash and cash equivalents, including pre-delivery payments for future aircraft deliveries, of Dh2.3 billion. Fuel costs were 25 per cent of operating costs, down from 30.6 per cent the previous year.

Income from baggage hand­ling, cargo and in-flight sales contributed 13.8 per cent of the airline’s total revenue, down from 15.1 per cent the previous year.

Demand increased for business class seats, introduced in 2014, driven by passengers from the subcontinent, followed by the Caucasus region.

Overcapacity is hurting the Gulf carriers where the growth in capacity outstripped demand. In the Middle East, capacity is expected to grow by 10.1 per cent this year, according to credit rating agency Moody’s and International Air Transport Association. Passenger demand, meanwhile, is expected to grow by 9 per cent.

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