Boeing Max Compensation Lifts Gulf’s Flydubai to 2019 Profit

(Bloomberg) --

Flydubai, the second-biggest customer for Boeing Co.'s grounded 737 Max, said compensation from the U.S. planemaker helped lift the discount carrier to an annual profit.

While revenue declined during 2019, the Dubai-based airline swung to a profit of 198.2 million dirhams ($54 million) from a 159.8 million-dirham loss the prior year.

An interim settlement with Boeing “contributed towards this year's results,” Chief Executive Officer Ghaith Al Ghaith said in statement Wednesday, without detailing the size of the payment. It won't fully counter the loss of business opportunities and market share, and further talks are ongoing, he said.

State-owned Flydubai, which has an extensive partnership with Emirates, has ordered 251 Max jets as it pursues an aggressive regional expansion. It has idled 14 of the model since March 2019, when a jet operated by Ethiopian Airlines Group became the second Boeing Max to crash in five months.

The accidents, which killed a total of 346 people, prompted regulators around the globe to ground the plane. The grounding will continue to hamper Flydubai's plans to add routes and frequencies, Al Ghaith said.

Read: Boeing Max Buyer Flydubai Says Grounding Has Set It Back 5 Years

Read More: Boeing Dangles Funds for Max Simulator Time Ahead of Return

Boeing has said it expects the embattled Max to return to service by midyear, though it has missed earlier goals. This year will remain challenging for Flydubai given the uncertainty around the timetable for the ungrounding and subsequent aircraft deliveries, Al Ghaith said.

The airline is exploring options to extend the term for the lease of aircraft that were due to leave the fleet in 2021.

With the coronavirus outbreak since the beginning of the year, Flydubai was forced to halt flights to Iran, a country that has one of the highest numbers of infections outside of China.

“It is still early to tell the impact of COVID-19,” the company said in an emailed statement. Tavel restrictions were enforced two weeks ago, so “the timeline to this is still unclear.”

More Numbers

• Revenue of 6 billion dirhams vs 6.2 billion dirhams in 2018
• Direct operating costs reduced by 17.8%
• Capacity fell 15.8% in 2019
• 19% of airline's schedule has been canceled as a result of the grounding

To contact the reporter on this story: Layan Odeh in Dubai at lodeh3@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, ;Claudia Maedler at cmaedler@bloomberg.net, John Bowker

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