Emirates and flydubai, two Dubai state-owned airlines, have announced an “extensive partnership arrangement” planned to begin within the next eighteen months. More than a codeshare but not quite a merger, the agreement will allow the two airlines to issue tickets for each other, coordinate schedules and frequent flyer programs, launch and coordinate new routes, and more. The action will allow flydubai customers to have access to Emirates’ network of international routes while providing Emirates customers with access to flydubai’s regional flights.
Despite plans for codesharing, network collaboration, and coordinated scheduling, the two airlines want to clarify that this deal is not a merger. Rather, it is a partnership.
“Both airlines will continue to be managed independently, but will leverage each other’s network to scale up their operations and accelerate growth,” read a statement released by Emirates and flydubai last Monday. “The innovative partnership goes beyond codesharing and includes integrated network collaboration with coordinated scheduling.”
The two airlines also plan to upgrade their hub at Dubai International Airport. The two carriers have plans to align their systems and operations. An Emirates spokesperson declined comment on how the two airlines plan to connect flydubai’s Terminal 2 hub with Emirates’ Terminal 3 hub.
The agreement can mean a lot Emirates and flydubai. The two airlines plan to fly to 240 destinations by 2022, with a fleet of up to 380 aircraft. Industry experts expect the partnership to strengthen Dubai’s position within the global aviation industry as the market share of the two airlines grows. This growth would be good news for both carriers, who have seen losses throughout the last year, as currency volatility (especially relating to the U.S. dollar), lower demand, and increased competition from foreign airlines undermine the core of the two carriers. (In May, Emirates reported an 83% drop in profit during the current fiscal year. Similarly, flydubai’s profits dropped 68% in 2016.)
“This is part of Emirates adapting and becoming more flexible with its business model,” said Will Horton, a senior analyst at the Center for Aviation (CAPA). “Adding flydubai’s existing network, plus new growth opportunities, gives Emirates a more unique footprint. It also improves Emirates’ position on short-haul and regional travel to and from Dubai.”
The new partnership will help Emirates and flydubai in multiple ways. First, it will help them to cut costs.
“Both airlines are currently the biggest operators out of Dubai International and can harness immense cost savings by working together,” said Saj Ahmad, an analyst with StrategicAero Research.
Multiple experts and airline executives also argue that Emirates, along with other major Gulf carriers such as Etihad Air, needs to change its business model to stay relevant. Having a more diverse fleet will help both Emirates and flydubai to increase revenue. Emirates only operates wide-body aircraft, most notably the Boeing 777 and the Airbus A380. Due to demand and airport constraints, this limits where Emirates is able to fly to. The addition of flydubai’s 737 aircraft and regional routes are expected to help boost ticket sales and profits at Emirates, as the new partnership will draw new customers who, per the new partnership, will be able to connect from an Emirates long-haul route to a flydubai regional flight, increasing ticket sales and revenue for both airlines.
“The model for Emirates with flydubai should be based on what Cathay pacific and Singapore Airlines have done in East Asia. Both Cathay and Singapore, via Cathay Dragon and SilkAir respectively, have set up sub-brands to serve regional destinations that do not require the premium offering or seat capacity of the primary airline,” writes Vinay Bhaskara, a contributor with Airways Magazine. “This allows both carriers to add precious feed at their central hubs while avoiding any brand dilution from a subpar product on regional routes.”
“The partnership will strengthen the position of both airlines and allow them to optimize use of their respective fleets with a greater ability to adjust aircraft capacity size according to route demand,” said John Strickland, an aviation industry consultant at JLS Consulting.
“Given the competitive profit pressure Emirates has faced due to falling prices, lower oil costs, and increased airline competition, Emirates can leverage the strength of flydubai’s network and dispense the need to by their own narrow-bodies,” Ahmad adds. “Vice versa, flydubai can offer flights on Emirates’ network without buying wide-bodies.”
The corresponded routes, schedules, and frequent flyer programs should draw more customers to both airlines, whether they were a customer of either Emirates or flydubai or not.
The two airlines plan to slowly roll out new coordinated services. They made the first step in fall 2017 with a preliminary codeshare agreement.