Dubai-based budget airline Flydubai is expected to have a challenging 2016 due to the overall economic outlook.

“This is going to be a difficult year… there might be challenges with yield,” said the company CEO Ghaith al-Ghaith.

The airline reported near 60 per cent drop in profits for 2015, to AED100.7 ($27.4m), in early February.

The airline’s revenue, however, rose by 11 per cent year-on-year, reaching $1.3bn, and passengers carried across its network correspondingly increased by 25 per cent.

The firm already acknowledged yield-related challenges in 2015, saying its revenue passenger per kilometre (RPKM) was under pressure due to factors ranging from a strong dollar, a challenging trading environment across the network, and a disruption or suspension of flights on some established routes. The airline also launched 17 new routes in 2015, which the company said would require some lead time to mature.

The company said fuel costs fell to 30.3 per cent of operating costs benefitting from lower fuel prices with 59 per cent of its fuel costs unhedged.

Going forward, the firm said it will hedge 16 per cent of its fuel requirements for the next 24 months “to provide a level of certainty and control to its fuel costs due to the ongoing fluctuation in fuel prices”.

The company closed 2015 with cash and cash equivalents totalling AED2.4bn.

Flydubai said it expects to take delivery of 16 new aircraft units over the next 24 months starting in May. The order includes five new Boeing 737 Max 8 due to be delivered in the second half of 2017.