Flydubai reported on Wednesday Dh198.2 million in profits for 2019, marking a return to profitability after recording Dh159.8 million in losses in 2018. Image Credit: Supplied

Dubai: Flydubai reported on Wednesday Dh198.2 million in profits for 2019, marking a return to profitability after recording Dh159.8 million in losses in 2018.

The profits came even as revenues declined by 2.6 per cent to Dh6 billion for the year, compared to Dh6.2 billion a year earlier, and passenger numbers fell nearly 13 per cent to 9.6 million last year from 11 million.

Flydubai said that it benefited from an interim settlement agreement with Boeing for some compensation for its 14 grounded 737 Max jets.

Ghaith Al Ghaith, chief executive officer at flydubai, did not disclose how much the carrier received from Boeing for having to ground its Max jets amid software issues with the model. Boeing’s 737 Max model has been grounded for about a year now across the globe after two fatal crashes involving Max jets belonging to Lion Air and Ethiopian Airlines.

“We have concluded an interim settlement agreement with Boeing for certain compensation due to flydubai in relation to the grounding of the Boeing 737 Max. The details of the interim settlement agreement remain confidential,” he said in a statement.

“This agreement has contributed towards this year’s results, but in no way can it compensate for the loss of business opportunity or market share experienced by the airline. Discussions are continuing between the parties regarding the ongoing impact of the grounding.”

The grounding of its aircraft has already had a “significant impact” on flydubai’s financial performance and is expected to continue hurting the carrier. In the first half of 2019, flydubai reported Dh196.7 million in losses, and attributed that to reduced operations from the grounding.

In November, flydubai’s chairman said that the grounding is expected to continue hurting performance, especially during periods when flydubai would have seen higher passenger numbers such as during Christmas and Easter.

On Wednesday, CEO Al Ghaith said that the outlook for 2020 is “challenging, given the uncertainty around the timetable for the return to service of the Boeing 737 Max aircraft, and the subsequent aircraft delivery schedule.”

“With a current fleet size of 42 aircraft, our ability to launch new routes and add frequencies will continue to be severely impeded,” he said.

Flydubai is exploring more options to extend the terms of leased aircraft, in order to limit disruption to operations.

“Whilst 2019 has seen a return to profitability, it does not reflect the loss of market position and the unfilled opportunities flydubai could have exploited,” the CEO said.

Besides compensation from Boeing, flydubai in 2019 benefited from lower fuel prices, which fell by 9 per cent. The airline said it also “kept a firm grip” on the business, cutting its direct operating costs by 17.8 per cent.

In its earnings statement, flydubai did not state how much of an operational or financial impact the outbreak of coronavirus might have. Though the carrier does not fly to China, which is the epicenter of the outbreak, it flies to markets such as Bahrain and Iran, both of which are reporting coronavirus cases.