Is flydubai an Airline Powerhouse?

A regular update where our in-house team of aviation experts and ISTAT certified appraisers use our data to analyse values, market movements and notable aviation news.

This week, our Head Appraiser Kane Ray looks at developments at the all Boeing 737 operator flydubai, paying particular attention to its historical fleet, orderbook, fleet activity and routes, as well as its 737 MAX 8 Market Values, in anticipation of an upcoming Narrowbody order at the November 2023 Dubai Airshow.

In this analysis, we look at some of the specific developments at flydubai and in the UAE, both historically and during 2023, and how they have shaped the airline’s fleet today, and might do going forward. Capacity and slot constraints at Dubai International Airport could influence flydubai’s next Narrowbody order, incentivising it to seek larger aircraft such as the Boeing 737 MAX 10 or Airbus A321LR.

Founded just over 15 years ago, and like other United Arab Emirates based airlines, flydubai has had a rapid rise. From its initial order at the 2008 Farnborough Airshow for 50 737-800s, flydubai today operates a fleet of 79 Boeing 737 aircraft, split between the 737-800, 737 MAX 8 and 737 MAX 9. Its current orderbook stands at 137 Boeing 737 MAX aircraft.

Since its inception the airline has pursued a strategy aimed at keeping its average fleet age low, placing its first follow on order five years later in 2013 for 737 MAX aircraft, and an additional order in 2017. It has also had a policy of not operating aircraft past 10 years of age. However, with capacity constraints and a reduced number of incoming 737 MAX 8 aircraft over the last few years, this stance appears to be changing somewhat, and the airline has recently committed to lease extensions of some of its older Boeing 737-800s.

flydubai’s presence amongst a small number of UAE commercial passenger airlines is significant as the largest operator of Narrowbody aircraft, whilst possessing the third largest fleet overall. UAE commercial Widebody and Narrowbody passenger airline fleets are detailed in the charts below.

flydubai has continued to add 737 MAX 8 aircraft. AviationValues data tallies seven additions thus far during 2023, after seventeen additions in 2022. For those aircraft added to the fleet in 2023, flydubai has completed sale and leaseback arrangements with Bank of Communications Financial Leasing, Clover Aviation Capital, Griffin Global Asset Management, JP Lease Products & Services, and SMBC Aviation Capital. flydubai was expecting to receive seventeen 737 MAX aircraft in 2023, although it is not known whether further supply chain issues and ongoing fixes, notably at Spirit Aerosystems, will impact the eventual total. Previous expectations were for 20 737 MAX 8 aircraft fleet inductions per year.

Despite delays, inductions of 737 MAX 8 aircraft are displacing 737-800s in the fleet. The fleet transition from 737-800 to 737 MAX 8 is shown in the chart below.

Although unconfirmed, it looks likely that its fleet of three 737 MAX 9 aircraft will be the only MAX 9 aircraft taken from the airline’s existing MAX orderbook. In mid 2023, flydubai also suggested that the 737 MAX 10 was only an order consideration, which aligns the airline to a 737 MAX 8 only orderbook presently. flydubai originally ordered a combined 251 737 MAX aircraft from the 2013 order and 2017 top up order but reduced this by 65 in 2021. It was originally thought that the airline would take a larger mix of MAX 8, MAX 9, and MAX 10 aircraft.

Throughout 2023, there has been a strong suggestion that flydubai would be committing to another Narrowbody aircraft order at the Dubai Airshow, and possibly the Airbus A321LR. This would represent a departure from the historical order trend for the airline, but it could open up opportunities for destinations further afield from the UAE.

flydubai’s Headquarters and fleet base is at Dubai International Airport (DXB), operating out of Terminals 2 and 3. Its routes cover the Northern and Southern Hemisphere, with destinations scattered throughout the Middle East, Europe, Central Asia, South Asia, Southeast Asia, East Africa, and Russia. The farthest North and South destinations are St. Petersburg, Russia and Dar es Salaam, Tanzania. East to West, they are Olbia, Sardinia, Italy, and Pattaya, Thailand.

In our previous Week 34 analysis (see “The African Commercial Passenger Market”), we detailed Africa’s most active markets. flydubai will achieve a milestone as being the first UAE based airline to operate direct flights to Kenya with a four weekly service Mombasa’s Moi International Airport (MBA) from January 2024. This route was announced in August 2023. Reported in September 2023 and starting in October 2023, it will also fly daily to Cairo Sphinx International Airport, Egypt, marking further expansion in Africa.

In the first half of 2023, it was reported that flydubai operated over 52,000 flights, an increase of almost 35% for the same period in 2022. The carrier was expected to increase capacity during the summer months, and AviationValues observes that the airline is enabling greater flexibility for capacity beyond the summer season with a recurrent agreement with Smartwings (Czech Republic) for four 737-800 aircraft on ACMI (aircraft, crew, maintenance, and insurance) wet lease.

Despite the need for additional lift with extra 737-800s, the 737 MAX 8 has now become the workhorse of the fleet and has surpassed the 737-800 in the last year for flight hours flown. Using AviationValues’ Activity Dataset analysis of ADS-B signals, the chart below compares the hours flown in the first eight months to 31 August in 2022 and 2023 by flydubai’s 737-800 fleet (2022: 55%, 2023: 41%) to those flown in the same period by its 737 MAX 8s (2022: 45%, 2023: 59%). As we noted in our blog post from Week 33 (see “Are the 737-800s still in the game?”), the 737-800 may have been superseded by the 737 MAX 8, but it still is very much in the game.

DXB airport is often labelled as capacity constrained with other UAE airlines, Emirates, Headquartered there too. A new investment of up to USD 2.7 billion was announced in August 2023 to address this. This investment will be made in the next five to seven years to optimise the airport and support passenger growth projections in the next ten to fifteen years. This will be welcome news to flydubai and their own fleet growth ambitions for operations to and from DXB.

Emirates and Etihad dominate total fleet Current Market Values (CMV) for UAE based passenger airlines due to the presence and dominance of young Widebody aircraft in the respective fleets. flydubai positions third ahead of other Narrowbody only operators. It has the second youngest average age amongst the operators, bettered by only Wizz Air Abu Dhabi.

Looking at flydubai’s fleet specifically, the following table details its aircraft variants, including an age range, and the corresponding low to high CMVs determined by AviationValues’ algorithm.

During 2023, AviationValues has encountered several of flydubai’s 737 MAX 8 sale and leaseback transactions. One example is Manufacturer Serial Number (MSN) 61020, registration A6-FKN. Delivered on 13th June 2023, MSN 61020 was part of a Japanese Operating Lease (JOL) structure with JP Lease Products & Services as the deal arranger and equity underwriter. The aircraft transacted for c. USD 55 mil.

The table below details the 12 month Market Value and Market Value percentage change for 0 year, 3 year, and 5 year old 737 MAX 8s, compared against its closest Airbus competitor, A320neo (see Week 28 – “The Future of Narrowbody Engines” for additional value analysis covering the Airbus A320neo).

Market Value increases for the 737 MAX 8 have led the A320neo in the 12 months ending 31st August. We explain this by the increasing values for production aircraft seen in transactions and the general recovery of MAX operations as Boeing works to deliver more of the already built aircraft that have been stored. It is our understanding that new production 737 MAX 8 aircraft will now sell between USD 52m and USD 53m, thus, we could expect continued and more significant Market Value increases in future.

flydubai has overcome slower than expected deliveries of Boeing 737 MAX 8 aircraft by extending 737-800 leases and retaining some owned aircraft. Supported by some wet lease arrangements, this seems to be a medium term solution before the arrival of more MAX 8 aircraft, and perhaps a higher capacity aircraft variant.

Representatives at flydubai have spoken candidly about Airbus A321LR aircraft, and how it could enable farther reaching destinations. The aircraft could also provide more seats and a reduced flight frequency benefit at a busy DXB. Based on its current fleet, and for operating efficiencies, an order for the 737 MAX 10 seems more plausible, although the delayed entry into service and comparative range (to the A321LR) could cast doubt; it certainly would not make the airline farther reaching. And there is precedent for operators with single manufacturer Narrowbody fleet strategies to suddenly switch manufacturer (jet2) or opportunistically decide to operate mixed fleets (Allegiant Air).

Further, flydubai has already converted orders away from the MAX 10, to the MAX 8. Could this be due to MAX 8 readiness with MAX 10 certification still ongoing, or is there a case for an Airbus A321LR order, opening up more European, Asian, and South and West African routes? Given the A320neo family orderbook, how quickly could flydubai induct the aircraft into its fleet, and could it access a lessor orderbook? Or could it simply be a trivial discussion to help with the bargaining for a future Boeing order.

AviationValues has tracked 87 A320neo and 737 MAX family sales 2023 year to date. Our Automated Value Model’s unbiased approach with supporting transaction prices accompanying our daily updated current and forecast values means our customers not only benefit from appraisal readiness but also gain valuable transaction insights relatable to our daily updated values. The same practice forms part of our appraisal report offerings for individual aircraft or portfolios. Get in touch to find out more.

Data as of September 2023.

Disclaimer: The purpose of this blog is to provide general information and not to provide advice or guidance in relation to particular circumstances. Readers should not make decisions in reliance on any statement or opinion contained in this blog.

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