Table of Contents
Company Overview 1
Key competitive advantages 2
Current Process Analysis 3
Operational costs and efficiency 3
Labour Cost 3
Fuel costs 4
Point-to-Point Service 5
Secondary Airports 5
Consistent aircrafts 5
Employee and labour relations 6
Problem Analysis 6
Technology Appraisal 7
Proposed Solution 8
Project Critical Appraisal 9
Dubai Aviation Corporation, working as flydubai is a low-cost airline company with its headquartering at Dubai International Airport. In fact, its operation is being managed from Terminal 2 of the same airport. As a matter of fact, the airline covers 83 destinations, consisting of Middle East, East Africa, North Africa, Asia, Indian Subcontinent and Eastern Europe from Dubai (flydubai, 2015). As of now, the airline is using different processes to bring about operation efficiency and to reduce cost such as flight consistency, fuel hedging, etc. Over the time, the flydubai airline has learned different tactics to bring efficiency to its operations. For instance, implementing e-ticketing and use of barcode in boarding is few of the examples. The problem in the process is pertaining to the baggage handling system. The proposed solution to this problem is the used of radio frequency identification (RFID), which is the prime focus of this report, moreover, the advantages and disadvantages of this technology has also been brought into focus.
Government of Dubai established an airline in July 2008, although flydubai is not a part of the Emirates Group, yet it supported the airline during its days of inception. As of 14 July, 2008 the organization concluded an order with Boeing, However, the flight schedule started on 1st June with initial destinations to Beirut, Lebanon and Amman, Jordan. Subsequent to that, the network of its operation expanded exponentially.
Flydubai, on 13 February, 2013 announced that it was holding talks with being as well as Airbus for an order of 50 aircrafts. However, on 19th June, 2013, flydubai again announced that it is aimed to bring business class facilities to its flight service. However, the business class cabin would included 12 seats in middle of window and aisle, 12 inch televisions, Italian leather seats, three-course meals, access to more than 200 movies and power outlets to support plugs of different country origins etc (Saxena and Gupta, 2012).
At Farnborough Air Show in July 2008, flydubai ordered 50 Boeing 737-800s with an estimated value of $3.74 billion. However, in November, 2010, flydubai concur a sale and leaseback deal with Avolon for four 737-800s aircrafts. The historic single-aisle agreement of flydubai was signed on November 17, 2013 with Boeing at Dubai Air show. As a matter of fact, Flydubai and Boeing announced an agreement for about 100 Boeing 737 MAX 8s and 11 Boeing 737-800 next generation aircrafts (Saxena and Gupta, 2012). The overall value of the commitment was around $11.4 billion, which as the biggest ever Boeing single-aisle airplane purchase in Middle East.
As of April, 2015, the fleet of flydubai is given in following table; however, the average age of aircrafts is 2.4 years:
Aircraft Model In Service Orders
Boeing 737-800 47 13
Boeing 737 MAX 8 0 75
Total 47 88
Key competitive advantages
Following are some of the competitive advantages of flydubai:
• Award winning customer service;
• Work culture/ human resource practices; and
• Low operational costs / High operational efficiency.
Current Process Analysis
Flydubai vividly has a discrete advantage against other airlines operating in the airline industry of Dubai, UAE. However, this is achieved by the dint of efficient and effective operational strategy, which, by and large, is one of the significant pillars of its corporate strategy. Following is the process analysis of flydubai in terms of its competitive dimensions:
Operational costs and efficiency
The airline industry, from a holistic point of view, is has been witnessing murky situation over the period. In this regard, staying profitable for an airline company is a complex and tedious task. As a matter of fact, flydubai has the lower costs and one of the strongest balance sheets in the airline industry of UAE. It is prudent to mention that two biggest associated costs for any airline includes labour cost, which consist of approximately 40% of the overall costs, followed by fuel cost, i.e. 18% approx (Gubisch et al., 2011). Some of the tactics flydubai uses to minimize its operation cost is its flying point-to-point routes, using secondary smaller airports, maintain high utilization of aircrafts, carrying consistent aircrafts, using e-ticketing mechanism, etc.
The labour cost of flydubai accounts for approximately 37% of its overall operating cost. Higher labour productivity is perhaps the single most critical factor for a successful low-fare airline company. According to sources flydubai is less unionized airline company of Dubai and its wages are perceived to be exceeding rest of the airline companies operating in the region (D’Silva et al., n.d.). As a matter of fact, the low-fare carrier labour advantage has greater flexibility pertaining to labour rules that allow cross-utilization of all the employees, except few that have safety related issues. This sort of utilization and prolonged cooperative culture among unions or groups contributed equally to lowering the labour costs.
Low-fare airlines like flydubai have a great cost advantage over other airlines mainly due to their employees that yields more output per employee. For instance, as of the year 2011, the overall productivity of flydubai was over 45%, which is higher than similar regional airlines, in spite of the larger average aircraft size and longer flight lengths of these network carriers. Hence, by its unending pursuit for lower labour costs, flydubai has successfully been able to have positive impact on its revenues.
Fuel costs, as a matter of fact, is the second largest cost for any airline after labour costs. In fact, this cost accounts for about 18% of the total operating expenses of the airline. However, the airline that opts to prevent unstable fuel costs chooses to hedge fuel prices. For instance, if an airline can control the fuel cost, then it can easily estimate forecasted earning and future budgets. Since the airline business has expanded at an agile pace, thus it has become prudent for the organization to become competitive on price, which is key to surviving and success. Indeed, it is very difficult to pass on the higher fuel prices on passengers by increasing ticket prices in such a competitive environment (Yerra and Yerra, n.d.). Flydubai has remained successful in fuel hedging strategy in order to save fuel cost, this strategy, in fact, is big among other similar carriers.
The flight operating mechanism of flydubai is point-to-point service in order to enhance its operational efficiency and too contributed to cost effectiveness. For instance, majority of the flights of flydubai are of short routes. This strategy keeps flydubai to keep its flights engaged more often and thus ultimately helps achieve greater efficiency.
Flydubai uses smaller or secondary airports for the sake of reducing travel delays and thus enhances greater service to its passengers. As a matter of fact, this particular strategy has fostered on-time performance. Flydubai has also remained successful in cutting its operational costs better than its competitors.
Having the majority of Boeing 737-800s jets, this simplifies flight scheduling, maintenance of aircrafts and enhancing its operational efficiency. In addition to that, other associated costs such as training cost for pilots, mechanics and cabin crew is lower due to single aircraft strategy. Moreover, procurement, provisioning and another related operation has also witnessed simplicity that ultimately resulted in cost reduction. Consistency in aircrafts also makes flydubai to effectively utilized is cabin crew staff.
The idea of ticketless travel was a prime advantage to flydubai due its reduced distribution costs. As a matter of fact, flydubai became ticketless soon after its inception, and today it is about 90% ticketless. Passengers can use credit cards for purchasing tickets, and, in fact, the 70% of the total revenue is generated using online bookings (Yerra and Yerra, n.d.). In the past, there was around 10% of the agency commission that was affecting the overall profitability and cost effectiveness of flydubai, but currently the booking commission is very meagre that has significantly contributed to its revenues.
Employee and labour relations
Flydubai has highly been termed as having novel management style. The organization keeps prime emphasis on high-performance relationships. Moreover, this kind of people-management practices ensures unparalleled success in the airline industry.
Flydubai has invested around almost $10 million in the last few years to enhance its terminal and corporate operations. As a matter of fact, the prime aim of flydubai was to replace its conventional boarding system with an electronic system that includes bar-code recognition system. In fact, this technology aimed to maintain high efficiency at flydubai. However, in order to remain efficient flydubai integrated information of passengers for 100s of daily flights. However, there was a fear that it will increase the time to get the passengers on board. After implementing this technology, it was found that scanning each bar code did not help boarding schedules, in terms of increasing or reducing it, rather it did take more time from administrative process. This system is strengthening the ability of flydubai to match passenger record and its reconciliation. Indubitably, the process is much automated, the moment barcode is scanned at the terminal, it writes off the passenger from the list instantaneously (O’Connell, 2011). However, the previous process was manual and did involve laborious work to find information for each of the passengers, for instance, searching in different software screens from the time of reservation till final check-in to boarding.
But the issue of luggage identification is still having same problems as was before the introduction of bar-code scanning. For example, there is no such mechanism in place that can ease the luggage handling and identification process, this is the major problem in this regard, which further needs technological intervention, similar to the boarding process, in order to further enhance operational efficiency of flydubai.
Although, flydubai is using state of art technology in its flight operations, yet there is one area where it can further excel. For example, after its inception, soon it realized the need for electronic boarding pass, as well as e-ticketing. This not only helped the organization to enhance its operational excellence but has also contributed to cost reduction. For instance, the e-ticketing has slashed the spread of agents, which is now be used for many other operational purposes, and bar code mechanism during boarding process has also provided organization the fruitful results for the long run. Considering this fact, the technological use was already on its pelt at flydubai due to its multifarious use for different operational processes.
In fact, the bar code mechanism for the boarding process has greatly eased flydubai because it gets rid of manual checking of passengers using different software screens, and that was wasting a significant portion of time. However, with barcode mechanism, the passenger can easily check off using a simple scan of the relevant boarding pass. But the problem with luggage was still lingering and did not resolve despite improvement in passenger boarding mechanism. Passengers of flydubai still have to wait for the longer period till their baggage gets clarified after it’s scanning and identification of baggage is another challenge that the passenger has to face during their itinerary using flydubai flights. For instance, there is no such automated system that can help passengers to easily identify or even detect their baggage, which if done, could be a great advantage for the airline because it not only ease customers life but will contribute towards operational excellence.
The proposed solution for bringing efficiency in baggage handling and identification process for flydubai airline is to use radio frequency identification (RFID). The success of this technology can be taken from its use in supply chain industry and several other sectors for more than a decade. Recently, this technology has stepped in the airport baggage handling operations. RDID technology allows items to be tracked through electronic tags. One of the most important advantages of using RFID tags on the traditional bar code baggage sorting system is that there is no need of the line of sight to read RFID tags. For instance, it uses radio waves to communicate information. As a matter of fact, the read rate of RFID is much more than that of bar code system, in fact, according to some sources it is over 99% (Zhang, 2008), and this means only a few bags would be left untreated or need manual sorting. This technology implemented in airports since the year 2008 and even before that for the use of baggage sorting and transfer applications. Its first implementation was materialized at Aalborg Airport, Denmark in 2010.
The success stories of the implementation of RFID for managing baggage handling operations at different airports are a positive sign for flydubai. However, this technology can help flydubai airline to maximize its operation excellence. Although the organization has successfully rationalized the boarding and ticketing operation, yet by the help of RFID the baggage handling process can be rationalized and greater operational efficiency can be materialized.
Project Critical Appraisal
The RFID system gives instant view of the baggage information and also provides intelligent solution for the overall operations. As a matter of fact, RFID is much attuned to the conditions of airports and helps lessen operation cost, maintain high passenger satisfaction level and improve operation efficiency. RFID is better to that of barcode system with specific benefits such as anti-jamming, individual item identification, long range and multi-recognition. The implementation of RFID reduces the cost of labor and gives greater value. Hence, substituting barcode with RFID is an emerging as well as an inevitable solution (Zhang, 2008).
Initially, the implementation of RFID will ultimately need much investment, which includes purchasing of readers and tags and other construction of relate infrastructure. But the fact is, this is one-time investment and must be shared by both airlines as well as airport due to its shared benefits. The maximum benefit of this technology can only be achieved when similar RFID infrastructure facilities to be established across the small and large airports of all countries, but large airports must lead the process. All in all, flydubai airline, with the help of Dubai, and other airports can established this technology. However, the implementation of this system would yield more benefits than its cost due to its dynamic working mechanism. Hence, this technology is full of advantages with only few disadvantages, which can be ignored considering its broad-spectrum benefits for the flydubai airline.
In epitome, flydubai is one of the cheap short haul airlines of Dubai. Since its inception, the airline has remained successful and had competed with major players in the industry. The overall process of flydubai helps the organization to achieve operation efficiency by reducing associated cost, such as labor and fuel cost, flight consistency, e-ticketing, etc. Soon after its establishment, the flydubai airline has introduced barcode system for boarding yet it left baggage issue unattended, which is crucial for any cost competitive airline like flydubai. In that regard, the proposed solution to rationalized baggage system is to use RFID. There are many advantages of it such as log range, anti-jamming, no need of line of sight, etc. The only disadvantage is the high initial cost, which, of course, can be shared with airports due to its shared benefits. All in all, the implementation of RFID in the baggage handling system would complement operation efficiency of the flydubai airline.
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Flydubai (2015), Retrieved from https://www.flydubai.com/en/about-us/
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