Bloomberg News

Boeing Faces ‘Open Race’ With Airbus in 50-Jet FlyDubai Deal (1)

July 04, 2013

FlyDubai, which operates an all-Boeing Co. (BA:US) fleet, said there’s an “open race” between the U.S. manufacturer and European rival Airbus SAS (EAD) to supply it with 50 narrow-body aircraft worth $5 billion at list prices.

The discount carrier, which currently uses 30 Boeing 737s, is considering the re-engined Boeing 737 Max and Airbus A320neo models and plans to make a choice by November’s Dubai Air Show at the latest, Chief Executive Officer Ghaith al-Ghaith said.

“We will choose what’s best for us and what’s best could be a new type,” al-Ghaith said in an interview at the company’s base in Dubai, United Arab Emirates. “Both aircraft appeal to us. The best decision is the one that costs us the least.”

Airbus stole a march by offering the Neo ahead of the Max in late 2010. The A320 upgrade has since won more than 2,400 orders, giving it about 60 percent of the re-engined single-aisle market, with customers including Boeing operators such as American Airlines and Turkish discount carrier Pegasus Airlines.

FlyDubai, which competes with Sharjah-based Air Arabia and Jazeera Airways of Kuwait in the emerging Middle Eastern low-cost sector, aims eventually to grow its network to 100 cities from 64, al-Ghaith said, adding that more planes are required to meet capacity needs as outstanding deliveries near an end.

The carrier has 20 737-800s still to be added to the fleet through early 2016 from a batch of 50 worth $3.74 billion ordered at the Farnborough Air Show in 2008. Both the equivalent Max 8 and the A320neo have a list price of about $100 million.

Market Potential

“We don’t have much time left to grow,” al-Ghaith said, adding that the Middle East offers plenty of potential for expansion. “We don’t have the same penetration in terms of flights and links to the points close to our region like mature markets. More airlines and more link-ups are required.”

Discount carriers would benefit from further open skies accords between nations, giving access to new markets, as well as an easing of visa restrictions and improved access to busy destinations such as Cairo, the CEO said.

The carrier may issue a sukuk or Islamic bond to fund the planned 50-aircraft purchase, though it could comfortably finance the order from its own cash flow, al-Ghaith said.

“The market is very positive about the U.A.E. and Dubai and even more positive toward FlyDubai to lend us whatever funding we need, so we don’t envision any issues,” he said.

To contact the reporter on this story: Deena Kamel Yousef in Dubai at dhussein1@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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Companies Mentioned

  • BA
    (Boeing Co/The)
    • $123.23 USD
    • -1.17
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