flydubai secures Boeing finance deal

The four aeroplanes will be delivered between now and December to fuel the airline's rapid network expansion.

flydubai has secured a US$320 million (Dh1.17bn) financing deal for four Boeing 737s from GE Capital Aviation Services (GECAS), giving the month-old budget airline a financial boost amid tight conditions for credit within the air travel industry. The aeroplanes will be delivered between now and December to fuel the airline's rapid network expansion. The airline, owned by the Dubai Government, launched its first route on June 1 and plans to operate 15 routes by the end of the year, amid forecasts that airlines worldwide will lose $9bn this year because of the economic downturn. Ghaith al Ghaith, the chief executive of flydubai, said its first month's performance was above expectations, but he did not give figures. The airline currently flies to Beirut, Alexandria, Amman and Damascus. It has announced flights from next month to Aleppo in Syria, and to the Indian cities of Lucknow, Coimbatore and Chandigarh. GECAS, based in the US and the largest aircraft lessor in the world by fleet size, negotiated the deal with flydubai in a matter of weeks because the start-up represented a "promising new franchise", said Doug Winter, the senior vice president and regional manager of GECAS. "We look forward to a long and successful partnership," he added. The deal comes at a time of industry optimism that a year-long slide in global air passenger demand, brought on by the world economic situation, appears to have found a floor. Last week, however, the International Air Transport Association said: "Although the impact of the recession appears to be stabilising, strong headwinds from debt and low asset prices are expected to weaken and delay any significant recovery." flydubai has generated huge interest since the Government announced last year its intention to start-up a competitor to Sharjah-based Air Arabia, with the promise of another source of low-fare flights on new aircraft for local residents seeking regional travel. The airline was created with Dh250m in capital from the Dubai Government and was advised during its start-up by the management of its sister operation, Emirates Airline. The flydubai model is unique to the Middle East because it offers a low base fare and then charges for services that are normally covered in the price of a ticket. The company seeks to reap extra revenue by charging nominal fees for checked luggage, extra legroom, and for passengers who choose their own seats. Its only free allowance is 10kg of carry-on luggage. Mr al Ghaith said despite the fact that Middle Eastern customers were not used to paying such charges, they had responded well to it. Officials from both GECAS and flydubai expressed hope that further finance deals would follow. Neil Mills, the chief financial officer at flydubai and a former executive at the European budget airline easyJet, said the sale-and-leaseback deal with GECAS was done to ensure that both parties benefited. Yesterday's finance agreement is flydubai's first leasing deal after self-financing its first two 737s in operation. It has another 44 aircraft that will require financing - and are scheduled for delivery over the next five years - stemming from its $4bn start-up order made last year at the Farnborough Air Show in Britain. The lessor, part of the US blue-chip giant GE, signed 14 lease agreements with Middle Eastern and North African airlines last year, it said. Existing customers include Emirates, Royal Air Maroc, Egyptair, Qatar Airways, Bahrain Air, Sama, NAS and Saudi Arabian Airlines, for the lease of new aeroplanes from Airbus, Boeing, Bombardier and Embraer. The speed with which the GECAS deal was concluded stands in contrast with a pending lease deal with Australian-based Babcock and Brown Aircraft Management. Mr al Ghaith said the airline was still negotiating a four-aircraft leasing arrangement with the company, ranked as the fourth-largest aircraft management firm, despite first announcing details of the arrangement at the same Farnborough show. flydubai said it would also consider future leasing deals with DAE Capital, an aircraft leasing business set up by several Dubai institutions in 2006. DAE Capital has more than 200 aircraft on order and recently received a $450m loan from Citibank to fund the purchase of nine Boeing aircraft. [e-mail]