New low-cost airline Flydubai plans to use a fuel hedging strategy to maintain the lowest fares in the industry, recently appointed COO Kenneth Gile has said.
Plans for the Dubai-based carrier’s launch in mid-2009 are being finalised at a time when budget operators are struggling to stay “budget”.
Volatile fuel prices are putting pressure on them to raise fares and surcharges.
Gile spent 25 years with US-based Southwest Airlines, one of the world’s most profitable carriers which is acclaimed for its successful fuel hedging strategy.
And he said the US budget company’s model could be applied to Flydubai.
Southwest’s aggressive hedging programme has saved it an estimated $3.5 billion (Dh12.8bn) since 1999.
“We are focusing on implementing a successful hedging plan and Southwest Airline’s hedging strategy is something we could look at,” Gile told Emirates Business.
“We are considering it and have already started some preliminary processes. We are developing a hedging plan right now. Fuel is one of the biggest expenses for any airline so we have to look at ways to control it in order to be able to offer the lowest fares in the region.”
Flydubai is aiming to heavily leverage technology to bring down its costs.
“We will be heavy on the IT side of things,” added Gile. “This means that we will do whatever we can to deliver low weight paper, implement electronic bookings, use IT in the back office systems and so on. And we will leverage that to the maximum dollar.”
Other cost-saving measures are likely to include using efficient engines that cut fuel consumption to the minimum, fitting lightweight seats and having efficient ground operations.
“By keeping the fuel burn to the minimum and having successful fuel hedging you can keep the price as low as possible – and we want to focus on being the lowest cost carrier.”
Flydubai is examining the markets it needs to serve as it formulates an aggressive marketing strategy.
The carrier, which is being assisted by Emirates, will offer services to Dubai from the whole Middle East region, North and East Africa, Southeast Europe and the Subcontinent.
“More than two billion people live less than a five-hour flight from Dubai and we plan to offer more customers more opportunities to travel home,” said Gile.
Flydubai, which has start-up capital of Dh250 million, will begin operations at the new Al Maktoum International Airport in Jebel Ali with two planes initially. The carrier placed a $4bn order at last month’s Farnborough International Airshow for 54 Boeing 737-800 aircraft.
It will own 50 and will lease the other four from Babcock and Brown Aircraft Management. It plans to increase its current 25-strong staff to 600 by 2010 and has already begun the process of appointing pilots.
“We will not be using Emirates’ pilots, we will recruit our own,” said Gile.
“Emirates is assisting us but eventually we will be a separate entity. We are working on getting launched and being independent.
“Flying low-cost to major markets, non-stop, with new jets is the core strategy we are working on,” said Gile.
$3.5bn: Has been saved by Southwest due to its aggressive hedging programme
Dh250m: Is the start-up capital of Flydubai and it will initially fly two planes
$4bn: Order placed by the airline at Farnborough for 54 Boeing 737-800