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| 18 January, 2018

Aviation: Emirates and flyDubai will continue to soar

Emirates set to dominate headlines this year as it rebuilds traffic to US cities and integrates more closely with flydubai

Emirates and FlyDubai aircrafts

Emirates and FlyDubai aircrafts

Emirates/Handout via Thomson Reuters Zawya
Over 79,000 trade visitors... Deals totalling over $113bn... A litany of widebody and narrowbody orders, led by Emirates ordering up to 40 Boeing 787-9 and 787-10 Dreamliners and flydubai signing a deal for up to 225 Boeing 737 MAXs... And that was just the 2017 edition of the Dubai Air Show.

Dubai Airports will likely report 2017 as another record-breaking year for passengers handled and will retain the top spot for international traffic as it steamrollers towards the 100m passenger mark.

And although naysayers have for years being forecasting an implosion in the GCC’s aviation sector, even a Saudi-led blockade of Qatar hasn’t dampened opportunities. So, what will 2018 hold?

In short, bellwether airline Emirates will dominate headlines for a number of reasons.

Chief among these will be the re-introduction of key routes into the United States, where several schedules were reduced due to the travel ban and subsequent laptop/electronics bans imposed by the Trump administration. Since these restrictions were lifted, the airline has witnessed a return to robust demand on US services, so expect a reinstatement of double-daily flights to key hubs like Boston and Seattle.

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Equally, the economic boon such routes provide both to the USA and the UAE means that the Trump Administration has rightfully cast aside the inane whining of various US carriers, who falsely accuse Emirates and others of being beneficiaries of state aid.

It is therefore ironic that Emirates and flydubai are now two of Boeing’s biggest customers, with orders worth over $100bn for 777s, 777Xs, 787s and 737MAXs. These directly create US jobs in the wider aerospace sector and supply chain. President Trump can see that, which is why allegations from US airlines about Gulf carriers have fallen by the wayside, and the Open Skies pact will likely remain in place with zero interruptions.

Emirates will continue to work more closely with flydubai, as Qantas’s exit from the Dubai market will free up much-needed gate space. Don’t be surprised to see flydubai move to Terminal Three so the airlines can continue closer collaboration on route networks.

For its part, flydubai’s relentless growth points to two key elements. The first is that the introduction of the fuel-efficient 737 MAX 8 family will allow the airline to fly further and deeper into Europe, opening new markets, stimulating demand, slashing fares and allowing the airline to cut its operational costs. Its deal for 175 MAXs, with an option for 50 more, has also thrown down the gauntlet not only to Air Arabia, but to other would-be low-cost airlines in the GCC.

Air Arabia only has a handful of planned A321neo’s arriving in 2019 – more than two years after flydubai exploits its advantage with its 737MAXs. Air Arabia will still be operating gas-guzzling A320ceo’s by the time most of 737 MAXs dominate flydubai’s fleet. As a result, it will find it harder to compete against its Dubai-based neighbour.

As for competitors, SaudiGulf Airlines hasn’t made any impact at all (in fact, it is struggling to survive), while flynas and Jazeera Airways, alongside SalamAir have shown nowhere near the amount of potential they claim. Meanwhile, the Saudi Government-backed flyadeal doesn’t seem to have a sustainable business model without state support.

Critically, the development of Al Maktoum International / Dubai World Central will become a bigger focus area, and it will need to attract more airlines to operate from the facility.

Congestion down the road at Dubai International may force some to look at DWC as an alternative, particularly as roads and hotels near DWC are improving all the time.

Saj Ahmad is the founder and chief analyst at Strategic Aero Research

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