Flydubai thrives on developing new markets in Central Asia, Caucasus
Flydubai has emerged as one of the largest airlines in Central Asia and the Commonwealth of Independent States (CIS). Following the recent launch of services to Tashkent and the upcoming launch of Sochi, flydubai will have 21 destinations in the CIS.
The Dubai-based hybrid airline serves all five Central Asian countries, including newly added Uzbekistan, and all four countries in the Caucasus. Its Russian network will grow to nine destinations as Sochi is launched and several seasonal destinations are resumed.
While the CIS accounts for only 15% of flydubai's total seat capacity this summer, its network in the region is important strategically, since most of the markets are underserved and growing. Flydubai has excelled at developing new markets in the CIS, along with other regions such as Africa and Eastern Europe that previously were not served from Dubai.
- Flydubai has become one of the largest airlines in Central Asia and the Commonwealth of Independent States (CIS), serving all five Central Asian countries and all four countries in the Caucasus.
- The airline has excelled at developing new markets in the CIS, which are underserved and growing.
- Flydubai plans to continue expanding its network in the CIS and other regions as it quadruples its fleet over the next decade.
- The airline has been successful in gaining access to previously untapped markets, such as Uzbekistan, through recent liberalization efforts.
- Flydubai has a strong presence in Azerbaijan and Georgia, serving four daily flights to Baku and Tbilisi during the peak summer season.
- Transit traffic and business travel play a critical role in the success of flydubai's CIS network, with approximately 30% of the airline's total traffic being transit and the availability of business class cabins attracting corporate travelers.
Summary
- Flydubai launched services to Tashkent in Uzbekistan in Mar-2019, giving the airline service to all five countries in Central Asia.
- Flydubai is launching services to Sochi in Jun-2019, which will give the airline nine destinations in Russia, including seasonal destinations.
- Tashkent and Sochi will expand flydubai's CIS network to 21 destinations, those being nine in Russia, six in Central Asia and six in Armenia, Azerbaijan, Georgia and Ukraine.
- In its first decade flydubai has succeed at developing and growing unserved markets in the CIS and other regions.
- Flydubai plans to continue developing its network in the CIS and other regions as it quadruples its fleet over the next decade.
Flydubai CEO Ghaith Al Ghaith discusses the airline's accomplishments in its first 10 years, its expansion in the CIS, and how it has succeeded at launching previously unserved routes
Flydubai now serves every country in Central Asia and the Caucasus
Flydubai launched services in Mar-2019 to the capital of Uzbekistan, Tashkent. Uzbekistan had been an obvious white spot in flydubai's network as it was the only Central Asian country not yet served.
Over the past several years the airline has built up a strong and profitable niche in Central Asia and the neighbouring Caucasus region. Central Asia and the Caucasus consists of nine countries - all of which are now served by flydubai.
These nine countries account for approximately 15% of flydubai's seat capacity this summer. They include the Central Asian countries of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as well as the Caucasus countries of Armenia, Azerbaijan, Georgia and Russia.
Flydubai succeeds at gaining access to Uzbekistan
Flydubai has been seeking to serve Uzbekistan for some time. The airline was finally able to launch Tashkent after recent liberalisation.
Uzbekistan has started to open up its aviation market over the past year as part of an overall reform agenda and initiative to increase tourism. Flydubai is likely the first of several foreign airlines to benefit from the liberalisation.
FlyDubai CEO Ghaith Al Ghaith told CAPA TV on 30-Apr-2019 that Uzbekistan has huge potential, given its relatively large population (over 30 million people) and the recent liberalisation, which is expected to drive tourism and economic growth. "They are coming up to enormous growth in terms of opening up the country. You will only hear fantastic things from now on from Uzbekistan", he said.
When asked how flydubai was finally able to gain access to the Uzbekistan market, Mr Ghaith replied: "You work hard then you have to be in the right place at the right time. ... You have to work hard to ensure that you open this. Once it's open it is huge because [of] the potential of Uzbekistan."
Flydubai has been a pioneer in Central Asia
Flydubai is the first airline from the Middle East to operate scheduled flights to Uzbekistan. As the Uzbekistan market continues to open up and grow, other airlines from the Middle East will almost certainly follow.
Flydubai has similarly been a pioneer in other Central Asian markets and its success had led to new services from other airlines - as well as more flights from flydubai.
In Kazakhstan, flydubai now has 12 weekly flights - seven to the main city of Almaty and five to the capital Nur-Sultan (formerly known as Astana). Last winter it also operated a seasonal twice weekly service to the third largest city in Kazakhstan, Shymkent.
Flydubai is the second largest foreign airline in Central Asia
In Central Asia overall, flydubai will have 38 weekly one-way flights during the upcoming peak summer season (Jul-2019 and Aug-2019). In addition to the 12 Kazakhstan frequencies, there will be 14 weekly flights to Bishkek in Kyrgyzstan, five to Tashkent in Uzbekistan, four to Ashgabat in Turkmenistan and three to Dushanbe in Tajikistan.
Flydubai has become the largest foreign airline in the Central Asian market after Turkish Airlines. Turkish Airlines has nearly twice as much seat capacity as flydubai and seven destinations in Central Asia.
The only Central Asian destination that is served by Turkish and not by flydubai - Samarkand in Uzbekistan - is an obvious potential new destination for flydubai.
Samarkand is the second largest city in Uzbekistan and its historic centre is also a UNESCO heritage site. Mr Ghaith said that flydubai currently had no plans for a second destination in Uzbekistan but pointed out that in other markets in the region the airline has evolved by adding new destinations and more capacity to existing destinations.
The third largest foreign competitor in the Central Asian market, China Southern, serves the same six Central Asian destinations as flydubai. However, China Southern has much less capacity in the region as it generally offers fewer frequencies (using narrowbody aircraft from its western China hub of Urumqi).
Central Asia top five foreign based on seat capacity: week commencing 22-Jul-2019
| Rank | Airline | IATA | Seats | Seat share* | Destinations |
|---|---|---|---|---|---|
| 1 | Turkish Airlines | TK | 24,515 | 6.1% | 7 |
| 2 | flydubai | FZ | 13,224 | 3.3% | 6 |
| 3 | China Southern | CZ | 7,412 | 1.8% | 6 |
| 4 | AtlasGlobal | KK | 7,840 | 2.0% | 4 |
| 5 | Lufthansa | LH | 5,304 | 1.3% | 3 |
Flydubai has a strong presence in Azerbaijan and Georgia
Flydubai also serves six other former Soviet republics that are considered Central Asia but are part of the Commonwealth of Independent States (CIS) - Armenia, Azerbaijan, Georgia and Ukraine. As previously mentioned, Armenia, Azerbaijan, Georgia and Russia are also part of the Caucasus region.
Flydubai has become a particularly strong competitor in Azerbaijan and Georgia. During the peak summer season (July and August 2019) it will operate four daily flights to both Baku in Azerbaijan and Tbilisi in Georgia. Flydubai will also operate five weekly flights this summer to Batumi, a second destination in Georgia that it serves seasonally.
In Azerbaijan, flydubai is the second largest foreign airline after Turkish Airlines (based on seat capacity for Jul-2019).
Top 5 airlines in Azerbaijan based on seat capacity: week commencing 22-Jul-2019
| Rank | Airline | IATA | Seats | Seat share |
|---|---|---|---|---|
| 1 | Azerbaijan Airlines AZAL | J2 | 67,004 | 47.2% |
| 2 | Turkish Airlines | TK | 17,310 | 12.2% |
| 3 | flydubai | FZ | 9,744 | 6.9% |
| 4 | Air Arabia | G9 | 5,376 | 3.8% |
| 5 | Aeroflot | SU | 4,508 | 3.2% |
In Georgia, flydubai is the fourth largest foreign airline after Wizz Air, Turkish, and Russia's Ural Airlines.
Top 5 airlines in Georgia based on seat capacity: week commencing 22-Jul-2019
| Rank | Airline | IATA | Seats | Seat share |
|---|---|---|---|---|
| 1 | Georgian Airways | A9 | 19,691 | 11.6% |
| 2 | Wizz Air | W6 | 18,198 | 10.7% |
| 3 | Turkish Airlines | TK | 16,793 | 9.9% |
| 4 | Ural Airlines | U6 | 15,136 | 8.9% |
| 5 | flydubai | FZ | 11,484 | 6.8% |
Flydubai serves all but two CIS countries
In Armenia, flydubai has a daily service to Yerevan. Flydubai is the fourth largest foreign airline in Armenia, excluding Russian competitors.
In Ukraine this summer it is operating a daily service to Kyiv and two weekly flights to Odessa. Ukraine is expanded during the stronger winter season, when flydubai has two daily flights to Kyiv and three weekly flights to Odessa.
Flydubai now serves all but two CIS countries. The exceptions are Belarus and Moldova.
Flydubai dropped services to Chisinau in Moldova in 2015. It has never served Belarus but currently offers an offline one-stop service to the capital Minsk with its codeshare partner Belavia Belarusian Airlines.
Flydubai has a large network in Russia
Flydubai has also developed a large presence in Russia. It currently serves only three destinations in Russia (based on OAG schedules for the week commencing 13-May-2019) but this winter will have nine Russian destinations.
Of the six Russian destinations not currently served, two destinations are being resumed for the peak summer season, three are winter-only destinations that are resuming this winter, and one is a totally new destination. The new destination, Sochi, is being launched on 7-Jun-2019 with two weekly flights.
Flydubai operates up to 40 weekly flights to Russia during peak winter months. Its summer Russia schedule this year peaks at 27 weekly flights (in July and August).
Flydubai is the third largest foreign LCC in the Russian market after Latvia-based airBaltic and Turkey's Pegasus.
Russia international LCC capacity by airline: week commencing 22-Jul-2019
| Rank | Airline | IATA | Seats | Seat Share |
|---|---|---|---|---|
| 1 | Pobeda | DP | 55,944 | 44.2% |
| 2 | airBaltic | BT | 15,452 | 12.2% |
| 3 | Pegasus Airlines | PC | 14,840 | 11.7% |
| 4 | flydubai | FZ | 9,396 | 7.4% |
| 5 | Wizz Air | W6 | 6,582 | 5.2% |
Emirates and flydubai both serve Moscow
However, flydubai has less than 1% of Russia's total international market - even during the summer and winter peaks. It has less seat capacity in Russian than more than 20 foreign airlines, including its sister airline Emirates.
Emirates has 21 weekly year-round flights to Russia, consisting of two daily flights to Moscow and one daily flight to St Petersburg. Emirates does not have any other destinations in the CIS.
Moscow is the only CIS destination that is served by both Emirates and flydubai but they use different Moscow airports. Emirates operates to Domodedovo and flydubai operates to Vnukovo.
Flydubai focuses on inbound segment of Russia-UAE market
Flydubai currently has only five weekly flights to Moscow Vnukovo but has 14 weekly flights in winter. Russia and Ukraine are strong inbound markets for Dubai, with most passengers travelling in winter. The other CIS markets are generally stronger in summer.
Mr Ghaith pointed out in the CAPA TV interview that in winter it is +25 degrees Celsius in Dubai whereas it can be -25 degrees Celsius in Russia. "It is good enough reason for people to travel. There is huge potential for tourism", he said.
Mr Ghaith added that Russian cities also have big populations. "We look at these opportunities and we build the traffic. That's how it works."
Flydubai focuses network expansion on unserved routes
Identifying and developing unique unserved or underserved destinations in the CIS has been one of flydubai's key strengths.
In Jun-2019 Flydubai will become the only airline linking Dubai or any airport in the UAE with Sochi. It is already the only airline operating from Dubai or anywhere in the UAE to two of its other destinations in Russia - Krasnodar and Mineralnye.
Five of flydubai's other CIS routes are also exclusive - Dubai to Batumi, Bishkek, Odessa, Tbilisi and Yerevan. However, Air Arabia serves Tbilisi and Yerevan from nearby Sharjah and is launching Bishkek in Jul-2019.
Flydubai has used the same network strategy for growing in other regions. Mr Ghaith pointed out that since its inception in 2009 the airline had launched over 70 routes that were not served previously. "That has an enormous impact on the business here and also the livelihood of other people that lives in these other places that are connected now to Dubai", he said.
In addition to boosting tourism in Dubai, the new routes have provided UAE residents an opportunity to take short holidays in new destinations that were previously unknown.
Flydubai has worked closely with several foreign governments to open up markets, leading to new visa policies that have enabled UAE residents to take holidays in emerging destinations such as Baku without the hassle and cost of visas. Mr Ghaith said that several destinations that were previously unknown to UAE residents had become "household names".
Transit traffic plays a critical role in developing flydubai's CIS network
While stimulating demand in the local market has been critical to developing flydubai's network in Central Asia, the Caucasus and other regions, transit traffic has also been an important contributor. Approximately 30% of flydubai's total traffic is now transit, but most of its routes to Central Asia and the Caucasus have a much higher transit component.
See related report: flydubai's model is network; Gulf Air's is boutique
Two of Flydubai's Central Asian destinations and two of its Russian destinations are now served from Terminal 3 at Dubai International Airport, enabling quick connections to Emirates-operated flights.
Flydubai started operating a small number of flights at Terminal 3 in Dec-2018 and Mr Ghaith said that over time the airline plans to add more flights at Terminal 3 to improve connectivity with Emirates. For now, most flydubai flights continue to operate at Terminal 2; although connections are available from Terminal 2 to Terminal 3, where Emirates is based, there is a 120min minimum connection time.
Approximately 10% of flydubai's passengers now connect to Emirates. Improved connectivity with Emirates should help the airline continue to expand in Central Asia and the Caucasus, given that most of the destinations it serves in these regions are relatively underserved and growing rapidly.
Business and corporate traffic is also an important contributor
Flydubai also now has the product to attract business traffic heading to Central Asia and the Caucasus. The airline has a business class cabin on a large portion of its fleet and even lie-flat business class seats on some aircraft.
Routes to Central Asia and the Caucasus are generally served with aircraft featuring a business class cabin, and increasingly will be served with aircraft featuring lie-flat seats as the 737 MAX fleet is returned to service and expands.
Mr Ghaith said that there were no plans to retrofit its existing 737-800 fleet with the improved business class product from the MAX because the airline plans to phase its 737-800s out as they reach eight years old. Flydubai has 237 MAX family aircraft on order - in addition to the 14 grounded aircraft - providing ample capacity for growth over the next 10 years as its 46 737-800s are phased out.
As the fleet quadruples in size, flydubai will be able to pursue significant capacity expansion in the CIS and continue to launch new unserved destinations.
The CIS can be a challenging region to serve, but the opportunities are enormous
Launching services to Central Asia and the Caucasus can be challenging from both a regulatory and cost perspective. Airports in this region are generally expensive and have monopoly service providers.
However, Mr Ghaith said flydubai had succeeded in developing services by working closely with airport authorities, the local travel industries, governments and the public. "It's not a formula that fits all but there are things you have to manage to successfully operate in these countries", he said.
Governments in Central Asia and the Caucasus have generally been favourable to flydubai and are able to recognise the economic benefits that can be achieved when flydubai enters a market and expands. "We at flydubai are being sort of looked at as a model of airline or operator that can change things", Mr Ghaith said.
The formula is now proven, with flydubai helping lay the groundwork in new emerging markets that eventually leads to services from other airlines. As a pioneer, flydubai benefits because it is in an ideal position to expand as the market grows.