Flydubai secures $172m aircraft financing

Above: Flydubai’s CEO, Ghaith Al Ghaith, Jonathan Morris, CEO, Standard Chartered UAE and Kieran Corr, chief commercial officer Pembroke Group at the contract signing.

The eight-year sale and leaseback agreement represents financing of $172 million in list prices and follows the request for proposal (RFP) issued by Flydubai for its 2012 aircraft funding requirements. The two new aircraft will enter the fleet in June and July, increasing the low-cost carrier’s capacity, while supporting network growth across the GCC, Middle East, North Africa, Indian Sub-Continent, Asia, and Central & Eastern Europe.

Industry analyst Saj Ahmad, commenting on the arrangement, said:  "Flydubai's relentless growth has made it very attractive for international banks that wish to assist in its ambitions. This sale and lease back arrangement provides the airline with fresh capital, while allowing them to expand operations without directly owning the two airplanes.

"For Standard Chartered, the deal is an attractive one since the 737-800 is not only an investors favourite for strong residual values, it also commands much higher lease rate premiums than the Airbus A320, which also holds fewer passengers - and that translates into less revenue.

"Given that  flydubai operates its 737-800s with 189 seats, more than any of its regional rivals, not only are they generating more revenue, they are also racing towards their goal of breaking even this year. This is especially important to the airline as it is just over three years away from completing all of its 737 deliveries. To that end, the airline is closely evaluating the 737MAX family and it is likely that a deal for the 737 MAX-8 will be firmed up sooner, rather than later - especially as Boeing keeps selling slots to other customers. Flydubai cannot afford to slow its growth down by not having new airplanes in place otherwise the  drive for profitability could slide by several years and it needs more fuel efficient airplanes to mitigate against continued rises in oil and fuel costs."

Flydubai’s CEO, Ghaith Al Ghaith, said: “The enthusiastic response to our RFP, which was once again over-subscribed, is a positive start to our fourth year of operations. This is the first such agreement we have made with Standard Chartered’s subsidiary, Pembroke, and underpins the continued confidence lessors have in us as we drive growth by increasing capacity and connectivity. We have expanded rapidly to become the second largest carrier operating from Dubai International Airport and growing our fleet allows us to serve more passengers around the region.”

Jonathan Morris, Standard Chartered UAE’s chief executive, said: “The UAE is one of Standard Chartered’s top five markets globally and we are committed to helping our clients expand their businesses in the UAE and globally. As an international bank, we strive to bring best international practice in banking and finance and we are glad to extend this facility to flydubai.”

Pembroke Group’s chief commercial officer, Kieran Corr, said: “We are pleased to combine the global aviation capabilities of Pembroke with Standard Chartered’s local expertise to provide a tailored leasing solution to flydubai. This transaction is a further testament to Standard Chartered’s continued commitment to our airline clients in the Middle East.