Published on December 1st, 2014 | by Jim Lee0
Flybe announces new routes, fleet changes and the end of its joint venture with Finnair
On 12th November, the Flybe Group plc reported its half year results for the six months to 30th September. While it reported a significantly improved performance in its core UK business, Flybe UK, this was more than offset by a full impairment of assets related to its joint venture with Finnair and a provision for EU 261 flight delay claims. Flybe reported an overall loss before tax of £15.3 million (€19.22 million) during the period, compared to a £13.8 million (€17.34 million) profit for the equivalent period last year. Revenue was also down at £307.8 million (€386.84 million) for the half year – a drop of 12% from 2013’s figure of £351.1 million (€441.08 million). UK business recorded a profit before tax of £13.7 million (€17.21 million) up by £2 million (€2.51 million), while passenger revenue per seat increased by 8.7% to £54.75 (€68.80). Contract flying by Flybe UK generated revenue of £7.3 million (€9.17 million) in relation to two aircraft operating on a Brussels Airlines agreement throughout H1 2014/15 and a third aircraft operating on three-month agreement with Aurigny before it moved on to a two-month contract with Helvetic. Flybe had only just returned to profitability last year, helped by savage cost-cutting that involved giving up airport slots, cutting jobs, exiting unprofitable routes and grounding surplus aircraft. Its three-year venture with Finnair while it made a profit on flights provided on a contract-only basis, it lost money on eight joint venture routes that fed Finnair’s long-haul services. Not surprisingly, Flybe announced the sale of its 60% share in Flybe Finland for €1. The share purchase agreement is conditional only upon competition authority approval in Finland and is targeted for a 1st January 2015 completion. Full impairment of this investment has resulted in a net £9.9 million (€12.43 million), non-cash charge in the period.
On 12th November Flybe announced a rash of new base and route announcements. From 15th March 2015, it will start services from Stansted, including year-round services to the Isle of Man (up to three flights a day) as well as Newcastle and summer flights to Newquay. A new base at Bournemouth Airport will begin with a Glasgow route with effect from 29th March next with routes including Amsterdam, Manchester, Paris Charles de Gaulle, Jersey, Biarritz, Deauville (Normandy) Toulon and Dublin following in May. It’s Aberdeen base will re-open from the start of the Summer season on 29th March and four based 78-seat Bombardier Q400 aircraft will serve routes from Aberdeen that include those to London City, Manchester and the Flybe Shuttle to Jersey. The Bournemouth – Dublin service will operate four times each week from 18th May to 2nd September. Flybe launched a number of services from Dublin on 27th October, including the service to London City which was inaugurated on that morning by Dash 8-400 G-JEDR as the BE1312, which had positioned in from Exeter the previous afternoon as BEE032P. G-JEDR was named ‘Spirit of Dublin’ and is one of six Flybe Dash 8-400 aircraft that were named under a ‘Spirit of Regions’ theme at London City Airport that day. The first London City to Dublin flight, BE1313, was operated by Dash 8-400 G-FLBE. Flybe said that it expects to carry over half a million passengers annually on its London City services, of which 100,000 are expected on the Dublin route. The other two new routes to Dublin inaugurated on 26th October were Inverness, where Dash 8-400 G-ECOF operated the BE215/214 and Southend where Dash 8-400 G-ECOT operated the BE391/392.
Flybe also announced new codeshare agreement, with Aer Lingus with immediate effect and enables Flybe customers travelling from Exeter, Inverness, Southend and Southampton to access, via a single stop in Dublin, an even wider range of destinations across North America and Canada. Aer Lingus’ north Atlantic network includes 10 daily flights across the Atlantic to Boston, New York, San Francisco, Orlando, Chicago and Toronto. This codeshare agreement also extends to those travelling on Flybe franchise partner flights to Dublin – namely those from Donegal with Loganair and Flybe’s joint operation from Southend with Stobart Air. This builds on Flybe’s current portfolio of five existing codeshare partnerships, namely those with Air France, British Airways, Etihad, Finnair and KLM, along with 17 interline partners that includes Emirates, Virgin Atlantic, Delta, Air Portugal and Qatar Airways.
Flybe has also announced a new three year agreement with Manchester Airports Group (MAG) which it says provides cost certainty and a competitive cost structure at Manchester, Flybe’s second largest base, and similarly advantageous cost certainty for ongoing operations at East Midlands, Stansted and Bournemouth airports.
Flybe has cancelled orders for 20 E175 jets in September and deferred others as part of a deal that will bring more Bombardier Q400 turboprops into the fleet. The 17th September announced was a set of linked aircraft agreements with Embracer and Republic Airways Holdings, designed to “address major legacy fleet commitment and secure right-sized aircraft” for the carrier’s future growth. Under the terms of the agreement, Flybe has agreed with Embracer to cancel twenty of its twenty-four EMB-175s from its firm order backlog of 24 aircraft, which form the remainder of the carrier’s firm order for 35 E175s from July 2010. The remaining four aircraft will be deferred until 2018 adding to the 11 already delivered. Flybe has agreed with Republic to sub-lease 24 71-seat Bombardier Q400 aircraft, with deliveries commencing in March 2015 and extending for a two year period. The aircraft have an average age of 5.4 years and will have an average sub-lease period of 4.6 years at March 2015. The aircraft will replace 21 Q400s currently with Flybe, which come to the end of their lease periods over the next four years. This intake of Q400s from Republic will make Flybe the largest Bombardier Q400 operator in the world. Republic will operate the aircraft for United Airlines under the United Express brand.
In an interview with Flybe’s chief executive Sad Hammed by John Mulligan in the Irish Independent on 30th October he said he was astounded at the state he found the airline in when he took over as chief executive. “It wasn’t an integrated organisation,” he says of Flybe with a list of the problems is enough to leave you breathless. “There wasn’t enough coherence, integration or teamwork. The costs were out of whack, you had surplus aircraft, the wrong aircraft, 40% of routes didn’t cover their fixed costs, and there was no commercial capability to speak of. We’d announce a new route before we’d even negotiated a rate with the airport.” The decision process about selecting new routes and destinations was more often than not based on “Voodoo” rather than rigorous analysis. Hopefully that is not the case regarding London City and its other new Dublin services! He also revealed that he has negotiated a three-year deal that will see him earn a cash payout of the equivalent of between 3-4% of any increase in the company’s market capitalisation, with no ceiling on what he can receive.
Saad Hammad hasn’t ruled out a future potential merger between Flybe and Stobart’s air division, which operates the Aer Lingus Regional service. “Possibly, we’ll see. There will be some Darwinian process and there will be winners and there will be losers,” he said.
Finally Flybe has selected Revenue Management Systems (RMS) to enhance its revenue management software. Flybe has chosen airRM, the innovative revenue management software developed by Revenue Management Systems, to help it identify sales opportunities and maximise passenger revenues. The airRM software allows airlines to closely control pricing and analyse performance through a robust suite of features. As such, the new system will provide state-of-the-art revenue management, inventory control and reporting tools.
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