BUSINESS

Low-cost onward journey key to flydubai

By Aneesh Phadnis
November 11, 2014 09:33 IST

The Gulf airlines often look at India as a natural extension of their core market.

Large carriers such as Emirates and Etihad have been making deeper inroads with the former launching an Airbus A380 flight to Mumbai and the latter adding new flights to India after picking up a stake in Jet Airways.

Indian airlines, too, get sizeable traffic to and from the Gulf countries.

Dubai sees the bulk of such traffic, with Dubai Airport Authorities claiming that India is the largest market served from Dubai, with an estimated traffic in 2013 of 8.3 million (growing at 13 per cent).

Recently, ‘flydubai’, a no-frills airlines threw its hat into the ring, as well, by launching its flight off Mumbai.

While the airline has been operating flights to Lucknow, Thiruvananthapuram, Kochi (the third-largest Indian market for Dubai) and Delhi (the second-largest), it would still be the smallest airline on the Mumbai route (the largest market) with five flights a week.

In contrast, Emirates flies five times a day, the most on a route that sees 15 daily flights. Even Indian low-cost carriers such as Indigo and SpiceJet have a higher market share. Regulatory restriction keeps it from increasing its frequency.

‘flydubai’ has its task cut out but its overriding pitch to flyers would be the onward journey it offers.

With Dubai being a hub to fly further west (mostly to the American continent), flydubai’s network which is well connected to Africa, Russia and East Europe is expected to come in handy in its sales pitch.

According to data from CAPA [Centre for Asia Pacific Aviation], Emirates captures 95 per cent of the onward-bound traffic from India and flydubai, has 4 per cent share, ahead of other players.

Unlike the Indian LCCs, the Dubai-based airline also sells its inventory on global distribution systems, giving access to a larger network of travel agents and has commercial agreements with other airlines which allow it to sell their flights tickets too.

Its business class offering, despite being an LCC, could sweeten the deal for business flyers.

It is planning a loyalty programme to reward frequent flyers with bonus miles and upgrades.

As with Emirates, flydubai is owned by the Dubai government (the management insists that the common ownership raises no interference).

It began operations in 2009 and launched its first flight to India in 2010, with a service to Lucknow.

Earlier this year, India and Dubai revised the air-services agreement, allowing 11,000 seats in addition to the existing 54,000 seats.

This enabled flydubai to add flights to Delhi, Thiruvanathapuram, Kochi, and now, Mumbai.

It has 25 weekly flights to seven destinations and plans to add four more daily services by next March (Emirates has 185 weekly flights, Etihad and Jet Airways, together, will have 217 weekly flights from 2015).

Its

growth, then, is constrained by traffic rights restrictions in India.

So far, the airline has deployed only two per cent of its capacity in India, with about 60 per cent offered on intra-Gulf and West Asian routes.

It offers a little over 9,000 seats per week to India, slightly higher than its capacity to Nepal and Afghanistan.

The carrier has grand expansion plans, however.

The airline’s current fleet size is 41 Boeing 737 units, and it has another 75 Boeing 737 Max units on order, which would be largely used for replacing its existing fleet.

CAPA expects the airline’s overall fleet size to go up to 200 aircraft. But the capacity-growth will depend on liberal grants of traffic rights by various countries including India, ie. the government opening up more seats on the route.

“We feel there is tremendous potential in the Indian market as it is under-served.

"We can add more if additional traffic rights are granted to us,’’ says flydubai CEO Ghaith Al Ghaith.

It would give its marketing pitch some muscle.

“About 70 per cent of our passengers are point-to-point.

"We have this opportunity to connect Indian passengers to other parts of the world, too, but we do not have enough seats from India,’’ Ghaith says.

CAPA believes flydubai could quadruple its presence in India and expects a deeper commercial cooperation between flydubai and Emirates, including a tie-up for loyalty programme.

“This would also highlight flydubai for Emirates’ flyers.

"The long-term benefits are of greater scale, particularly with the data and marketing opportunities that come with a larger loyalty programme, while flydubai may not have the resources to maximise a standalone programme,’’ CAPA said in a report. ‘flydubai’ refused to comment on CAPA’s observations.

According to aviation expert, Saj Ahmad, flydubai enjoys cost and network advantage over its Indian LCC peers and remains unaffected by Emirates’ dominance.

“Emirates doesn’t compete with flydubai, so there isn’t any major overlap.

"Emirates is a full-service airline that will pull passengers from India to Europe and the US, while flydubai will focus on cost-sensitive travellers.

"The only issue flydubai will face is the slow pace of seat allocation by the Indian aviation authorities. flydubai has already launched a record 23 routes in 2014 alone, so growth is not an issue but access certainly is, especially in India,’’ he says.

Aneesh Phadnis in Mumbai
Source:

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