flydubai CEO Discusses Gulf Aviation Growth at World Low Cost Airlines Congress

The CEO of Dubai’s first low cost airline gave insights into the industry and the challenges it faces as the world’s fastest growing aviation market develops. Ghaith explained how the low cost airline model is sometimes seen as negative in some markets, but contrary to this how flydubai is adapting the low cost model to successfully fit the region in which it operates.

Discussing the first year of operation for flydubai, he examined the hurdles the industry faced in expanding in the region. Ghaith explained the main concerns, which centred upon the aeropolitical level – specifically the regulation of the skies and visa restrictions.

Ghaith said: “The UAE has an Open Skies policy, which means any airline in the world is free to come to Dubai. The same flexibility is not afforded to UAE airlines flying into other countries in this [Middle East] region.

“Governments trying to protect their national carriers are reluctant to open up routes to other airlines they view as a threat. I say to them that there is plenty of traffic in the region for all well run airlines to be successful,” he said.

“It is this regulation of the skies that is the biggest single barrier to the development of air travel in the region.”

The issue of visa restrictions was cited as another barrier to travel, in particular affecting impulse and last minute trips that low cost travelling inspires, as the length of time to apply for visas greatly reduces these. However, Ghaith also pointed out that there has been relaxation in the requirements for visas in some countries, as these nations now realize that they were missing out on revenue brought by increased international flights in terms of trade, tourism and commerce.

As well as educating the industry on the obstacles to growing the Middle East aviation sector, flydubai is keen to educate passengers too, especially when it comes to new and alternative pricing structures available.

Ghaith commented on how flydubai has worked hard to offer customers options and freedom to choose what they want, to personalise their experience and the costs to suit them. One area he highlighted was the airline’s baggage policy.

“Passengers like the idea of being offered options; they like being able to save money by not bringing checked baggage for instance.”

“However, baggage has undoubtedly been one of our biggest challenges. Passengers who are used to travelling on larger aircraft, with greater hold capacity to take checked baggage have had to adapt to the concept of travelling lighter.

“In just one year, the concept has been so well accepted that 44% of our passengers capitalized on our lowest fares by travelling with just hand luggage. And this still left 56% of our passengers contributing extra revenue to the airline with checked baggage fees,” he said.

Speaking optimistically about competition in the sector, Ghaith said, “Low cost air travel currently accounts for just 7% of the total air travel market in our [Middle East] region, whereas in Europe it is as high as 35% - and some predictions are that it will reach 50% in a few years. There is no reason why we cannot reach those same figures and that is why I welcome competition; I welcome more players into the market.”

The flydubai CEO addressed several of the questions often asked about Dubai’s first low cost airline, including explaining about the carrier’s relationship with the UAE Government and whether or not they received preferential rates on fuel or charges at Dubai International Airport.

He explained that although the airline was government owned, there was no further funding or concessions past the initial start-up capital flydubai received at its inception. The link with Emirates Airline was also clarified, with Ghaith giving thanks to the airline which helped at the very beginning offering support, time and resources, but going on to demonstrate that the two carriers are now fully independent of one another.

“While we operate too many routes that are different to Emirates, we also operate too many routes Emirates also flies to. We do not discuss our network strategies and we offer a completely different product aimed at a different section of the market,” said Ghaith.

Highlighting flydubai’s independence from the government and Emirates, Ghaith discussed the airline’s financing strategies. “We have just completed our latest round of financing and have been pleasantly surprised by the interest we received from the market. In fact, we received offers for far more aircraft than we currently wish to finance; with offers for more than 80 aircraft from which we decided to take up for 9 of them.”  

“As a new airline to have that level of confidence and support from some of the world’s largest international aircraft financing companies is tremendously satisfying.  This latest deal secures our financing needs until June 2011,” concluded Ghaith.