Impact will depend on how long grounding lasts, CEO says

Dubai: Over six weeks after the UAE’s aviation regulator grounded all Boeing 737 Max aircraft for safety concerns, flydubai said it is still confident in the aircraft model and that it remains committed to its Boeing orders. However, Ghaith Al Ghaith, chief executive officer of flydubai, said the financial impact of that grounding may be “significant” if it lasts much longer.

Al Ghaith said on Sunday that 17 per cent of the airline’s seats are affected by the groundings. All Boeing 737 Max aircraft around the world are now grounded after two fatal incidents involving that model, with the latest one being of an Ethiopian Air plane that crashed and killed all 157 people on board. Boeing said it will be rolling out software updates to improve the aircraft’s safety, but all Max’s remain grounded. Al Ghaith but backed Boeing’s handling of the situation.

“When something like this [aircraft grounding] happens, we totally support it. I personally believe that after all the checks that are going to be done on this product, it will come back stronger than ever because it would have been checked so thoroughly. I personally trust that Boeing always manufactures aircraft that are safe,” flydubai’s CEO said.

The low-cost carrier is the only UAE-based airline operating any 737 Max, and has had to ground 11 Max 8’s and two Max 9’s. As a result, flydubai has had to cancel up to 15 flights per day, it said earlier, and has deployed some Next Generation Boeing 737-800 aircraft instead.

Asked about the impact of those cancellations, Al Ghaith said he could not yet quantify it as that would depend on how long the grounding drags on.

In an interview with Gulf News at the Arabian Travel Market (ATM) exhibition in Dubai, the CEO said the carrier will still be receiving the 200-plus 737 Max aircraft it ordered from Boeing over the next decade, and signalled that the groundings did not lead flydubai to attempt to modify its order.

The groundings come during a time when flydubai is already making operational changes to account for the closure of one of the two runways at its hub Dubai International Airport. Al Ghaith said the 45-day runway closure, which ends on May 30, has already been planned for and operations are running smoothly amid that.

A much bigger challenge for flydubai than the runway closure, however, is fuel prices, Al Ghaith said.

Fuel costs hurt the carrier’s earnings in 2018 when it reported its first loss since 2018 due to the impact of higher fuel costs and unfavourable currency exchange rates.

“Looking at this year, we are much more optimistic. The two elements [we’re looking at] are the Max groundings, and that’s definitely something that [we’re waiting to see] play out. The other thing that is more damning and difficult to address than the groundings is fuel,” the CEO said.

Brent crude oil prices have been on the rise since the start of 2019, jumping from around $62 (Dh227.7) a barrel in January to their current price of nearly $75.

“Fuel is a bigger sort of challenge. In the airline industry, we will be comfortable around $60-$65 a barrel, so anything above that will always present a challenge for anybody. How that plays out will say a lot about the year ahead … and how successful or less successful you are,” Al Ghaith said.

Despite these concerns, the CEO said he is optimistic about flydubai’s performance for the rest of the year, pointing that he expected fuel prices to drop and that the airline has had “a good start to the year” in terms of passenger numbers.

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