The decision by Emirates and flydubai to form an “extensive partnership” will benefit both airlines and customers alike. However, both airlines need to do everything possible to maintain their standing as independent companies and not succumb to the temptation of a merger in the pursuit of a tighter bottomline.
The decision to form an extensive partnership, instead of a merger, not only effectively prevents the two airlines from expanding into each other’s commercial territory, but it also offers a number of advantages as both airlines face greater competition in international markets. Volatile energy markets and currencies have already affected both airlines’ profitability over the past two years, and attempts to implement protectionist policies, in violation of open sky agreements, especially in the United States market, mean that the ability to offer services — and not just lower costs — is now at an all-time high.
The new decision is an excellent example of how two companies can build upon their shared resources and assets to reduce operating costs and expand their offerings to their customers through code-shares, shared frequent-flyer programmes and through a more coordinated network of flight schedules. Had a merger been implemented, instead of a partnership agreement, the resulting redundancies and reduced operating costs would have given the newly-merged company considerably greater profitability; but that would have come at the expense of the very idea on which flydubai was founded.
Emirates is one of the world’s premier international airlines, offering services and global routes that few other airlines can match, but with those services come additional costs that can reduce the airline’s attractiveness to travellers on a budget. That was where flydubai was meant to come in — to capture the market segment unserved by a premier airlines, while also offering service to smaller markets that may have proven unfeasible to Emirates. New codeshares will also provide a boost to Emirates, offering new markets to its customers — thanks to flydubai’s ability to penetrate those smaller markets.
A merger would likely have, over time, effectively diminished flydubai’s price advantage, since maintaining two separate pricing structures under one management could prove to be impractical.
Consumers will now likely see additional advantages as the two airlines announced further benefits on this partnership over the coming months. Given that both airlines are actively seeking innovative ways of improving customers’ comfort and given the fact that both airlines will be able to take advantage of the rapidly expanding Al Maktoum International airport at Dubai World Central, consumers have a lot of choices to look forward to.