While many airlines around the world are scaling back on routes and cutting back on spending to get by in today’s harsh economic reality, there are exceptions such as the new FlyDubai, a new low-cost airline based in Dubai which will start flying on June 1 with services to Amman and Beirut.
The company, which was established by the government of Dubai in March 2008 with start up capital of US$68 million, has ordered a total of 54 Boeing 777-800 aircrafts for its fleet at an estimated cost of US$4 billion. The first two planes are scheduled to be delivered in May.
In addition to the financial backing of the government, FlyDubai will also be assisted in its initial phase of operations by Emirates Airlines, which also is owned by government of Dubai, and since its establishment in 1985 has grown to a company with global reach and level of service to match any competitor.
In line with the low-cost model of Dublin-based budget airline RyanAir, FlyDubai will charge an initial low price of US$68 for a one-way ticket and charge extra for checked luggage, seat selection, food, and drinks.
FlyDubai will have a clear advantage over many of its competitors when it comes to buying fuel, which is one of the main costs for an airline.
Since the quantities of fuel used by an airline in its operations are too large to be purchased on a day-to-day basis, airlines buy in advance for delivery in the future in a process known as heading.
The advantage of this procedure is that airlines know that they will have fuel, but it also ties them up to long-term contracts which could prove to be costly as the contracts are signed at a set price and do not follow oil market prices. So when FlyDubai buys fuel, they can do it at today’s level of US$50 per barrel instead of US$150 as the price was last year.