Flydubai: From a Low Cost to a Hybrid Airline

Flydubai is introducing a Business Class (click here for full story) as of October 2013 with a soft start on selected flights in August 2013 after the delivery of its first two (2) class aircraft. A twelve (12) seats at 42 inches pitch dedicated cabin with 900 hours of IFE on a 12.1 inches HD touch screen. A full Business Class service with a lounge, dedicated check in, priority baggage collection and other amenities. Flydubai just changed its business model from a low cost carrier to a hybrid if not legacy airline following in the footsteps of Bahrain Air. Who will bear the cost of this offering remains to be seen. Are we looking at a low cost business model? not really looking at what Flydubai is offering.


The reason for the change, passenger feedback!!! Ah well, why would a passenger looking for low fares want to pay for a Business Class service. I guess some passengers wanting to interline with Emirates flying in Business would want that.

To put things in context, Flydubai and Emirates passengers can book flights that start with one airline and continue on the other (interline) on either website. Passengers and luggage are transferred from one terminal to the other free of charge.

The main beneficiary of this change is Emirates, they will get additional Business Class feed from the growing network (now at 60 destinations) of Flydubai especially destinations not served by Emirates into theirs. I am sure there will be some schedule tweaking  from these destinations to optimize connecting times.

Dubai has always evolved and Flydubai should not be any different. Only time will tell how this move will impact costs at Flydubai and to a certain extent Emirates.

Simply India

"I don't see any major problem for the deal" quoting India's Civil Aviation minister as the JetIhad deal was put on hold by the Foreign Investment Promotion Board (FIPB) and the Securities and Exchange Board of India (SCIB). Both have requested more details on the deal in terms of how much control Etihad will have in Jet Airways relative to its 24% stake. The issue seems to be all about effective management and control. Etihad and Jet Airways will meet both regulators requirements, it is not in their interest no to.

After the approval of the FIPB, the issue will be presented to the Cabinet Committee on Economic Affairs for final approval. 

It is not that the various regulators require clarifications that is a problem in India. It is the fact that one regulator approves the deal and things start moving along before the others clear it. One would think that there is a well thought out process for approving FDI, having talked about it so much, obviously not. 

Thoughts on Emirates Response to Jetihad

This post was first published in Bangalore Aviation as a part of a guest post titled Three-way Analysis: How does Emirates respond to Jetihad? written in collaboration with Devesh Agarwal and Vinay Bhaskara of Bangalore Aviation. This blog has been enhanced with their insight of the Indian aviation industry and government dynamics.

The Indian government has the knack of making interesting decisions like encouraging Air India to dump prices to gain market share causing mayhem in the market place and increasing Air India’s losses or Allowing Air Asia to invest in Indian aviation by approving a JV with the Tata and Bhatia group, creating an LCC that will put pressure on Indigo and SpiceJet. The latest was quadrupling the number of seats between India and Abu Dhabi which will benefit mostly Jet Airways and Etihad or Jetihad. 

In a Bangalore Aviation recent blog (http://www.bangaloreaviation.com/2013/04/infographic-airline-wise-share-of.html ) on International Traffic Share in and out of India showed Jet Airways share at 16.01%, Emirates at 13.04% and Etihad at 1.95%. The India market is important to the GCC carriers it provides feed to MENA, Europe and North America, a market that is being developed by these carriers with a station starting almost every month, the latest is Qatar Airways to Philadelphia. The latest India/UAE bilateral will almost double the allocated per week seats of Jetihad over Emirates.

Dubai has unofficially asked for a doubling of the per week seat allocation but requested an increase from 54200 to 72400 seats per week. 

Emirates can opt for an FDI in one of the LCCs and collect the prize of added capacity, an unlikely option after their earlier experience with SriLankan.

One option is for Emirates to code share with one of the large domestic players like Indigo or SpiceJet in order to increase its India feed and encourage them to operate into Dubai. Emirates currently code share with Jet Airways on the Mumbai and Delhi daily flights to Dubai. Flydubai flies only to three destinations Hyderabad, Ahmedabad and Lucknow and would like to increase its India destinations (which is less than 2% of its capacity). Flydubai is capable to fly to smaller secondary airports providing feed to Emirates through the link on their respective websites.

Code sharing is a short term solution. Ultimately, the real solution has to be through the India-UAE bilateral. Emirates needs the increased capacity for itself and Flydubai. Emirates can leverage Dubai’s position as a global hub and destination for Indians. Indians are the top expatriate investors in Dubai property (9 Billion AED) and the UAE is the second trading partner of India and has billions of dollars in investments. Add to the mix, almost two (2) million NRIs living in the UAE, a good proportion affluent. Dubai can also leverage its stature in the UAE to push the boundaries of the bilateral. Jetihad has shown that Air India and indeed the airline industry interests can be put aside by the government if the stakes and overall benefits are framed correctly. 

How Emirates and by extension Flydubai and indeed Air Arabia will frame their argument remains to be seen. Regardless, with the lack of a clear India Aviation Policy, the government will react to a properly framed request.

April, A Month of Surprises and Controversies

April has been an interesting month for Etihad and the region. No surprises, well maybe a few small ones.

The big news is Etihad's 24% equity stake in Jet Airways for $379 million, no surprises here.
This will increase Etihad's reach in India which was only 2% of India's international traffic in 2011/2012. It will also provide Jet Airways with an international hub in Abu Dhabi. The equity stake will come with the usual joint fuel purchases, insurance, maintenance and ground handling, etc. to save both airlines money.
 
The surprise is, two days later, the Indian Government signing an agreement with the UAE allowing for 50,000 seats weekly for each side from the current 13000 between India and Abu Dhabi phased in over 3 years. A move that miffed Indian carriers, and Jet airways wants 41600 seats (its current share is 4285 seats). So far so good, except Air India is now faced with a problem much bigger than Emirates. A GCC airline with a tremendous Indian market reach and feed. Air India is expected to get its act together and start competing, ah well more likely they will ask for more government subsidy, at a cost to the taxpayer which is much more than Etihad's FDI.

FDI was intended to inject foreign investment in the existing airlines to allow them to expand.
Well maybe not, earlier the Indian government approved a joint venture between Air Asia and the Tata Group, Air Asia India. A low cost airline that will compete with Spice Jet and Indigo. The two airlines least affected by the Etihad/Jet Airways deal. That will keep the aviation market in India in a state of flux.

Another surprise is a code share agreement between Air Canada and yes Etihad. Two years back a request for additional frequencies and destinations for Etihad and Emirates had Air Canada up in arms to the point that it strained diplomatic relations to the point the UAE government revoked the entry visa at arrival for Canadians among other things. Things have been improving and Canadians got their visas on arrival privileges back. It seems Air Canada realized there are Canadians living in the UAE.

Abu Dhabi was in the center of some controversy, a DHS proposal for a US Immigration and Customs pre clearance arrangement in Abu Dhabi. This had US Carriers, A4A and others complaining, putting it mildly, that this will provide an advantage to a foreign carrier in a city where no US carriers operate. Well, that prompted Dubai to put itself forward as an alternative, after all both Delta and United operate to Dubai and Emirates has more USA frequencies. I am sure we will be hearing about this in the coming few weeks.

Of course the old complaint of EXIM bank financing of foreign airlines' aircraft purchases came up again. Delta and others do not like it, according to them it affords foreign competitors owned by governments an undue advantage. These days competing aircraft are almost technically and operationally similar, so financing tips the balance. Europe has ECA to support Airbus, go figure Delta. Considering that US carriers don't even consider the MENA market worthwhile, taking the amount of direct flights to the region as an indication, the only thing it will achieve is loss of jobs at Boeing and their suppliers. US carriers have to learn to compete on service, I mean service comparable to GCC and Asian airlines and of course it would help if they increase the frequency from a daily flight to Dubai to a few other destinations in the region.

Last but not least, Qatar is demanding and Canada is resisting a request to move the ICAO headquarters from Montreal, where it has been since 1947. The reasons are location (too far for Europe and Asia), harsh winters, high taxes and of course visas, Canada makes it hard for delegates to get visas. Qatar proposed Doha as an alternative and is ready to build the new head quarters and fund the UN agency's running costs starting from 2017 (the lease for the HQ ends at the end of 2016)

On the lighter side of things passenger traffic increased in MENA and a few airlines were profitable!

MRO AMERICAS 2013

Aviation Week and Space Technology (AWST) runs the MRO Conference and Exhibition annually at various regions (Americas, Asia, Middle East, Europe etc...). Having worked in the UAE for more than a decade and a half, I have attended several MRO Middle East including the last one in Dubai in January 2013.

The MRO Conference and Exhibition provides a venue for international and regional speakers from the industry to discuss the state of aviation in general and the MRO sector in particular. The exhibition usually includes regional and international MROs that have a presence in the region allowing them to bring their latest developments to their customers and potential customers.

On a personal note the MRO Middle East exhibition provided me with the opportunity to catch up with friends and colleagues to discuss events both professional and personal. An exchange of views that though informal was important to remain current of what is happening in the region. The last MRO Middle East 2013 was an opportunity to say good bye to friends and colleagues before leaving to relocate to the USA.

MRO Americas 2013 (MROAM) held in Atlanta (16 to 18 April 2013) was an opportunity for me to observe how things are in the USA and in a way to introduce myself to a new market where I will be working.

MROAM is much bigger in terms of exhibitors and attendees than its Middle East equivalent. The conference had several sessions running simultaneously over the three days. Aviation is a truly global business,  so one sees the familiar large international MROs exhibiting alongside the USA regional players. The exhibition was well planned and it was easy to locate stands and booths.
The Aviation Week EVENTS app is a great help in locating exhibitors and keeping track of the conference sessions.

I was not expecting to meet many familiar faces at MROAM. Surprisingly, I was wrong. The value of MROAM for me was the opportunity to visit, observe and meet professionals from MROs in the USA and get the feel of how things are done. Things are not that different here, aviation is a truly global industry.