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Emirates and flydubai pursue rapid expansion in Ukraine and broader CIS region

1st August, 2013

flydubai is continuing to rapidly expand its extensive network in the CIS region with nine new destinations being launched in 2013. flydubai’s rapid growth in the CIS market will be followed by sister carrier Emirates, which recently unveiled plans to also serve Kiev from Jan-2014.

Dubai-Kiev Boryspil will be Emirates’ first service to the Ukraine and third overall in the CIS along with Moscow Domoededovo and Saint Petersburg. Further CIS network expansion by Emirates is likely to come as low-cost narrowbody operator flydubai continues to develop the Dubai-CIS market, growing routes to the point they can also support widebody service from Emirates.

Emirates announced on 11-Jul-2013 plans to launch daily Dubai-Kiev Boryspil service on 16-Jan-2014, using three-class, 258-seat A340-500s. Emirates’ service will be only the second carrier providing first class seats into Ukraine, following Uzbekistan Airways’ weekly Boeing 767-300 service.

CIS, the Commonwealth of Independent States, is a regional organisation whose participating countries are former Soviet Republics and was formed during the breakup of the Soviet Union. CIS includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan. While not official members, Turkmenistan and Ukraine also participate in the CIS.

Emirates has a small share of capacity in the CIS market (currently about 15,700 weekly seats). This is a very small amount when considering the overall seat capacity in the CIS region and the total seat capacity in the Emirates network.

UAE-CIS market seeing considerable development in 2013

The UAE-CIS market is seeing considerable route development in 2013 with at least 11 new routes being launched in 2013. More growth is expected in 2014, starting with Emirates’ Kiev service from Jan-2014. The majority of the new routes being launched this year are from flydubai although rival UAE-based LCC Air Arabia is also developing its CIS network.

Recently launched or soon to be launched UAE-CIS routes

Route

Airline

Frequency

Aircraft

Launch date

Other operators*

DXB-MRV

flydubai

Twice weekly

737-800

16-Apr-2013

N/A

DXB-OSS

flydubai

Twice weekly

737-800

24-Apr-2013

N/A

DXB-DYU

flydubai

Twice weekly

737-800

30-Apr-2013

N/A

SHJ-EVN

Air Arabia

Twice weekly

A320

16-Aug-2013

N/A

DXB-VOG

flydubai

Twice weekly

737-800

13-Sep-2013

N/A

SHJ-LWO

Air Arabia

Twice weekly

A320

15-Sep-2013

N/A

DXB-IEV**

flydubai

Daily

737-800

15-Sep-2013

flydubai and UIA (to KBP)

DXB-ODS

flydubai

Twice weekly

737-800

15-Sep-2013

N/A

DXB-DNK

flydubai

Twice weekly

737-800

18-Sep-2013

N/A

DXB-KRR

flydubai

Twice weekly

737-800

20-Sep-2013

N/A

DXB-ROV

flydubai

Twice weekly

737-800

22-Sep-2013

N/A

DXB-KBP

Emirates

Daily

A340-500

16-Jan-2014

flydubai and UIA

CIS region neglected by Emirates previously

Emirates has had little development in the CIS region previously and currently operates only two routes to the CIS, to Russia’s two largest cities (Moscow and Saint Petersburg). Emirates currently operates twice daily to Moscow Domodedovo (one frequency with A380s and one with 777-300ER), and daily to Saint Petersburg with A330-200s, for a total of about 15,700 weekly seats.

Emirates' plans to launch its own Dubai-Kiev Boryspil service, a route already served daily by flydubai, shows the route is now thick enough to sustain widebody service, partly due to flydubai’s efforts to develop traffic on the route. The development of the Dubai-Kiev market is also seen by flydubai’s plans to launch a second daily service to Kiev in Sep-2013 however to Kiev Zhuliany instead of Kiev Boryspil. For now it appears flydubai will maintain its daily service to Boryspil and operate the route alongside Emirates, as it does on several routes particularly within the Middle East.

Emirates’ daily operation using 258-seat A340-500 equipment will see it initially offer around 3,600 weekly seats on the route, making it the 16th largest carrier (based on weekly seat capacity) operating to Ukraine, based on Innovata data for late Jan-2014. flydubai in Jan-2014 will be the eighth largest international carrier in the Ukrainian market with around 8,300 weekly seats offered.

In total the two carriers will operate just under 12,000 seats to/from Ukraine per week in Jan-2014, equating to around 5% of the Ukrainian international seat capacity. This represents a huge increase over the group’s current 1% share of the Ukrainian market.

flydubai’s weekly seat capacity to and from the Ukraine is currently less than 4,200 seats. The carrier's capacity in the Ukrainian market is doubling in Sep-2013 as daily service to Kiev Zhuliany is launched as well as twice weekly services to Odessa and Dnepropetrovsk.

The expansion will see flydubai operate 22 weekly return flights to six Ukrainian airports, compared to 11 weekly flights to three airports currently. In addition to its daily Kiev Boryspil service, flydubai currently operates two weekly flights to Donetsk and Kharkiv.

It is likely as flydubai continues to launch more routes to the CIS, Emirates will also expand its CIS operations as some of the original flydubai routes become large enough to sustain larger aircraft.

Increasing growth by UAE LCCs flydubai and Air Arabia

LCCs from the UAE are accounting for a significant amount of the increasing capacity between the Middle East and CIS regions, particularly flydubai and Air Arabia. flydubai is currently the largest LCC in the UAE (based on weekly seats) however the airline is more of a hybrid carrier, especially after recently announcing plans to introduce business class on board some of its 737-800 aircraft from Oct-2013. According to the CAPA Fleet Database, flydubai currently operates a fleet of 30 737-800 aircraft and has 21 more on order with deliveries between 2013 and 2016.

See related report: flydubai adds business class, hybridising and growing closer as Emirates' short-haul regional unit

Launched by the Dubai Government, flydubai is run independently of Emirates. It operates numerous flights alongside Emirates and in many cases with similar timings to Emirates. flydubai also serves routes Emirates does not (largely due to the latter's widebody-only fleet). But the two carriers work closely, with flydubai interlining with Emirates in a hybrid move that enhances both carriers' networks.

Currently flydubai’s CIS network feeds exclusively into Emirates’ network ex Dubai. But with Emirates’ launch of Kiev, this will mark the first market in the CIS region that flydubai and Emirates will both serve, a situation which will likely become more common in the future.

CIS is a key area for flydubai, with the carrier serving many routes that are not yet served by Emirates. In Jan-2013 flydubai reported a 285% year-on-year increase in passenger numbers from the CIS and central and eastern Europe (CEE) for 2012. The airline reported its passenger traffic to existing CIS and CEE markets increased 114% year-on-year while more than 40% of its route development in 2012 concentrated on the CIS and CEE markets.

flydubai now operates 14 routes to eight CIS countries. This network sees it operate over 18,000 weekly seats, accounting for around 10% of the airline’s total capacity. This will continue to grow, especially in 2H2013 with the airline’s plans to launch five new routes in the CIS including three to Russia (Krasnodar, Rostov and Volgograd) and three to the Ukraine (Kiev Zhuliany, Dnepropetrovsk and Odessa).

The upcoming expansion will the flydubai’s CIS network increase to 19 destinations in eight countries. Further growth in Azerbaijan was also highlighted by flydubai CEO Ghaith Al Ghaith in May-2013 when Mr Al Ghaith described the Azerbaijani market as "mature" and "important" and said the airline may commence services to Gabala, Ganja or Nakhchivan.

Additional destinations to Ukraine would also be logical given the size and rapid growth in the Ukrainian market. flydubai will likely closely monitor the performance of its Odessa and Dnepropetrovsk services, which will launch on 15-Sep-2013 and 18-Sep-2013 respectively, as it evaluates potential new markets in the Ukraine.

flydubai’s CIS routes: as of 1-Aug-2013

Country

Destination(s) served from Dubai

Total weekly seats*

Armenia          

Yerevan

2646

Azerbaijan

Baku

1512

Georgia

Tbilisi

1134

Kyrgyzstan

Bishkek, Osh

1512

Russia

Kazan, Mineralnye Vody, Samara, Ufa, Yekaterinburg

3780

Tajikistan

Dushanbe

756

Turkmenistan

Ashgabat

2646

Ukraine

Kiev Boryspil, Donetsk and Kharkiv

4158

The airline’s main challenge for now in the CIS is the bilateral restrictions which have seen the airline unable to enter the Kazakh market. However over time these restrictions will likely ease, allowing flydubai to expand its presence throughout the CIS. Another noticeable absence in the airline’s CIS network is Moscow, however this is presumably due to the route already being well served by Emirates as well as by Aeroflot and SriLankan Airlines.

See related report: flydubai has bright outlook after recording first profit and emerging as close partner to Emirates

Air Arabia also expanding presence in the CIS

Sharjah-based Air Arabia is also expanding its presence in the CIS and currently operates to 11 destinations in three CIS countries (Almaty and Astana in Kazakhstan, Kazan, Moscow Domodedovo, Rostov, Ufa and Yekaterinburg in Russia and Donetsk, Kharkiv, Kiev Boryspil and Odessa in Ukraine).

The airline has two upcoming route launches, to Yerevan (Armenia) and Lviv (Ukraine) in Aug-2013 and Sep-2013, respectively. These will see the airline operate its first service to Armenia and its fifth to the Ukraine. The airline’s two routes to Kazakhstan are unique as Emirates and flydubai have not yet been able to enter the Kazakh market.

Air Arabia’s existing CIS network currently amounts to just under 9,200 weekly seats, equating to around 6% of its total capacity. Air Arabia’s CIS network is much smaller than flydubai’s CIS network (around half the weekly seats that flydubai currently operates) although it currently has slightly more capacity to the Ukraine than flydubai. This will change in Sep-2013 as flydubai doubles its Ukrainian operation, overtaking flydubai as the largest carrier in the UAE-Ukraine market.

Air Arabia is unlikely able to sustain as large an operation in the CIS as flydubai because it is strictly a point-to-point LCC while flydubai follows more of a hybrid model and acts as a feeder into Emirates’ network. Also, flydubai carries more business traffic than Air Arabia due to the connection options in Dubai and this is likely to increase with the forthcoming introduction of a business class product.

CIS airlines operate small number of routes to the UAE

CIS carriers operate a very small number of routes between the CIS and the UAE compared to the number of routes operated by UAE-based carriers. Focusing on Dubai, eight CIS carriers operate on eight routes from seven CIS countries to Dubai:

CIS airlines serving Dubai: 22-Jul-2013 to 28-Jul-2013

Airline

To/From

Other operators*

Aeroflot

Moscow Sheremetyevo

Emirates (to Moscow Domodedovo)

Azerbaijan Airlines

Baku

flydubai

FlyGeorgia

Tbilisi

flydubai

Somon Air

Dushanbe

flydubai

Turkmenistan Airlines

Ashgabat

flydubai

Ukraine International Airlines

Kiev Boryspil

flydubai

Ural Airlines

Yekaterinburg

flydubai

Uzbekistan Airways

Tashkent

N/A 

Aside from Ural Airlines’ Yekaterinburg-Dubai service, all the routes are from the respective carriers’ national capitals and, with the exception of Uzbekistan Airways’ Tashkent-Dubai service, see more than one carrier serving the route. CIS carriers have trouble competing on CIS-UAE routes against UAE carriers as Emirates and flydubai are able to offer a huge network beyond Dubai.

Other UAE-CIS passenger and freight capacity increases

Emirates’ service to Kiev Boryspil will also see freight capacity in the UAE-Ukraine market dramatically increase as widebody A340-500s will be operating on the route. Emirates expects the service to support key Ukrainian exports. Ukraine is currently the world’s largest exporter of sunflower oil and a major global producer of grain and sugar.

Dedicated freighter routes from the UAE to the CIS have also increased in 2013. Emirates SkyCargo and Etihad Cargo currently operate cargo routes through the CIS. In Jan-2013 Emirates SkyCargo took delivery of additional Boeing 777F aircraft which saw it launch weekly freighter service to Hong Kong via Almaty. Emirates SkyCargo also operates one other dedicated freighter service through the CIS, a weekly Dubai-Moscow Domodedovo-Frankfurt service using 777Fs, according to Innovata data.

Meanwhile Etihad Cargo is currently operating twice weekly Abu Dhabi-Almaty-Beijing service using A330F and 777F equipment.

Etihad Airways also recently increased its Abu Dhabi-Minsk passenger service from three times weekly to daily, effective 15-Jun-2013. But the carrier operates the route with two-class 106-seat A319s, which has limited capacity for cargo. The increase came as the airline signed a codeshare agreement with Belarusian national carrier Belavia.

UAE-CIS network will continue to grow though may be restricted by bilaterals

The UAE-CIS network is likely to continue to grow as the economies of the CIS continue to expand and require air links to the Middle East. There will be some challenges however, particularly the issue of overcoming the bilateral restrictions which have seen some UAE carriers unable to enter particular CIS markets such as Kazakhstan.

However over time these restrictions will likely ease, allowing UAE airlines to continue to expand their presence in the region. Emirates is likely to further expand its CIS network in the coming years, leveraging flydubai’s pioneering work in developing new routes between Dubai and the CIS.

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