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Partnership to strengthen position of Emirates, flydubai

Deal to allow airlines to cater to more passengers

Image Credit: Ahmed Ramzan/Gulf News
Shaikh Ahmad Bin Saeed Al Maktoum
Gulf News

Dubai: The partnership deal announced on Monday between Emirates and its low-cost sister carrier flydubai is expected to strengthen the position of both airlines and cater to more passengers, analysts said.

The carriers said their deal will allow them to join forces to grow their operations and offer passengers access to both networks. The partnership will be rolled out over the coming months, and includes code-sharing, network collaboration, and coordinated scheduling, Emirates said.

The airlines both stressed that the deal was a partnership and not a merger as some had speculated, adding that both airlines will continue to be managed separately.

“By having cooperation but not a merger, flydubai can continue being a low-fare airline for Dubai. If there was a merger, there would be questions if flydubai’s cost base would increase,” said Will Horton, senior analyst at the Centre for Aviation (CAPA).

He added that there are certainly large opportunities for Emirates and flydubai to connect more passengers.

“The majority of flydubai’s passengers will likely for some time only be travelling on flydubai and not connecting to/from Emirates, so flydubai’s main business will be supplemented by Emirates rather than taken over by Emirates,” Horton said.

Flydubai said on Monday that the deal will position both airlines to offer customers greater choice and optimise stakeholder value. Together, the two carriers will have a combined fleet of 380 aircraft flying to 240 destinations by 2022.

Peter Morris, chief economist at UK-based Ascend Consultancy, compared the partnership model to that of Australia’s Qantas and low-cost Jetstar, which remain separate yet integrated entities.

“For the moment, I think the jury would be out on what the net benefits for passengers would be, and how large they might be. The more the model is similar to that of Qantas/Jetstar, the more successful I think it would be,” he said.

Morris added, “If these two airlines (Emirates and flydubai) were merged, it is essential to retain the value of their different types of business model offering, which appeal to essentially different markets, and have different cost levels.”

Analysts pointed that Emirates’ and flydubai’s different models (one being long-haul and the other a low-cost carrier) would allow the airlines to boost their position and attract more customers as they each cater to a different demographic.

The partnership between the two Dubai-based airlines comes as carriers face challenges in growth due to slower demand, currency fluctuations, and lower global economic growth. In May, Emirates reported an 82 per cent year-on-year decline in its profits, which reached Dh1.3 billion for the financial year ending on March 31, 2017.

The carrier, whose profits fell for the first time in five years, cited “a turbulent year for aviation and travel.”

Similarly, flydubai’s profits fell last year for a second consecutive year to reach Dh31.6 million from Dh100.7 million in 2015. The carrier cited a “difficult pricing and operating environment.”

A flydubai spokesperson on Monday told Gulf News “it is the right time for this partnership” taking into consideration “market dynamics.”