Saturday, March 19, 2016

Russia Crash Turns Spotlight on New Type of Airline: Mideast Budget Carrier • The Dubai government set up FlyDubai in 2008 to copy the long-haul success of Emirates Airline

The Wall Street Journal
March 19, 2016 10:22 a.m. ET

DUBAI—The fatal crash of a Boeing Co. jetliner in the southern Russian city of Rostov-on-Don early Saturday puts the spotlight on a still relatively unknown breed of airline: the Middle East budget carrier.

For years, the region’s growth carriers such as Emirates Airline, Qatar Airways and Abu Dhabi-based Etihad Airways have made a name for themselves placing huge orders for Airbus Group SE and Boeing Co. long-haul jets. They have taken customers from U.S. and European rivals by offering lower fares and lavish services, including onboard showers and first-class suites.

In their shadow, the Middle East has embraced another group of airlines, the discount carriers trying to imitate the success of Southwest Airlines Co. in the U.S. and Ryanair Holdings PLC in Europe.

FlyDubai, whose airliner crashed on Saturday killing all 62 people onboard, was set up by the Dubai government in 2008 to mirror the success its flagship carrier Emirates Airline has had in long-haul flying in the low-cost segment. It quickly placed an order for 50 Boeing 737-800, the type of plane that was involved in the crash in Russia.

While Emirates helped set up FlyDubai, and both are owned by the Investment Corp. of Dubai, the city’s sovereign-wealth fund, the airlines operate independently. Sheikh Ahmed Bin Saeed al Maktoum, a powerful Dubai official, is chairman of both airlines and heads the Dubai Civil Aviation Authority. He is leading the airline’s crisis team, the Dubai media office said earlier.

“At this stage everyone in our company is in deep shock,” said Ghaith Al Ghaith, FlyDubai’s chief executive at a news conference in Dubai hours after the crash. “Our primary concern is for the passengers and for the crew on board,” he said.

The plane that crashed was built in 2011 and received regular maintenance checks, the last one in January this year, said Mr. Al Ghaith.

Mr. Al Ghaith said the aircraft’s pilot and co-pilot were “quite experienced” having logged more than 5,965 and 5,769 flying hours respectively, generally equivalent to several years in the cockpit.

The first commercial FlyDubai flight from Dubai to Beirut took place in 2009 and delivered its first profit three years later. The carrier, which carried more than 9 million passengers in 2015, has remained in the black.

The crash is the first fatal accident for FlyDubai. One of its 737 jetliners was hit by small-arms fire on approach to Baghdad International Airport last year. The U.A.E.’s big two airlines, Emirates and Etihad, have an unblemished crash record.

Dubai has invested heavily to build up its aviation safety expertise. The crash represents the first serious test of the ability of the government and FlyDubai to participate in a major crash probe and react to any recommendations that may emerge.

Mr. Al Ghaith said he would await the investigation’s results in response to questions whether bad weather or pilot error may have caused the crash.

“As far as we know, the airport was open and we were good to operate,” he said. “I can confirm as far as I can see there was no distress call,” he said. He dismissed suggestions the pilot should have diverted to another airport.

“As far as we are concerned we have not seen anything that would suggest that an alternative airport was on the cards,” he said.

FlyDubai operates in a highly competitive environment, vying for business not just against Emirates Airline, the world’s largest by international traffic, and Qatar Airways, but also a flurry of regional budget rivals. Air Arabia, based in neighboring United Arab Emirates state Sharjah, and Kuwait’s Jazeera Airways are among its biggest regional rivals.

The budget carrier has targeted many smaller cities such as Rostov-on-Don that aren’t large enough to fill Emirates Airline’s fleet of only large, long-range planes. It began operating to Rostov-on-Don in 2013 as part of wider push into Russia where the carrier already served several cities including Samara and Yekaterinburg.

The expansion comes as the U.A.E. has forged closer economic and political ties with Russia in recent years. Russian tourism to the U.A.E. has been steadily rising. The airline also is betting Rostov-on-Don is emerging as a regional business hub and that traffic would benefit from the city being named as one of the host cities for the football World Cup due to take place in Russia in 2018.

FlyDubai and its immediate discount rivals have been eschewing the bare bones discount model familiar with other budget carriers such as Spirit Airlines Inc. in the U.S. or Ryanair. FlyDubai offers passengers a modern in-flight entertainment system with movies, though for a fee.

The carrier has grown to operating around 1,400 flights weekly, with more than 500 pilots and 1,000 cabin crew.

Since placing its initial plane order, FlyDubai at the Dubai Air Show in 2013 also announced a more than $8 billion commitment to buy more 737-800 planes as well as 75 Boeing 737 Max 8 aircraft, a successor model to the aircraft type involved in the crash. The new planes were intended to replace some of the first 737s the airline acquired and fuel further growth.

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