Flybe nosedives on profits warning

[Roger Mexico]

3 hours ago, asitis said:

As I said simply a holding operation until I think Delta want it for long haul !

I thought those particular slots can with the condition they had to be used for domestic (effectively connecting) flights.  You're probably right about the current service being a holding operation though - they've not exactly been doing much to push it.

It may be that they want to stop its use as domestic though, because one truth rarely discussed is that the number of domestic UK flights (which statistically includes those to/from the IOM and Channel Islands) has actually been falling over the last decade, even as UK originated flights have risen. This is from the FT last month which saves me having to unzip CAA files:

Quote

The number of flights around the UK has fallen almost 20 per cent in the past decade as taxes, improved train services and market economics have pushed domestic air connectivity down the aviation sector’s list of priorities. Analysis of Civil Aviation Authority data by the Financial Times shows the number of domestic routes with more than 1,000 passengers per year has fallen from 228 in 2007 to 188 in 2017.

Domestic passenger numbers fell 10 per cent in the same period to 22.8m, according to CAA figures. By contrast, the number of people flying internationally rose 43 per cent to 229m over the same period. Jonathan Hinkles, managing director of Scotland’s Loganair, which flies mostly within the UK, said there had been “a major loss of domestic air connectivity” with airlines “progressively closing routes one by one”. Loganair, for example, has stopped its Edinburgh-Inverness service, while British Airways, which used to fly thrice-daily from Gatwick, the UK’s second busiest airport, to Manchester, has closed the route.

Major cities in the UK still have decent air connections to London, which is the government’s priority in terms of the domestic network, but they are not always linked to each other. There are no flights, for example, between Newcastle in the north-east and Manchester in the north-west. While there was a decline in air travel following the 2008 financial crisis, airlines and airports claim the main reason for the fall in domestic air connectivity is taxes, and particularly the air passenger duty that is payable by anyone flying from a UK airport. The tax, £13 for each economy flight, raised £3.4bn in 2017-18, up from £1.9bn a decade before. Graeme Mason, planning and corporate affairs director at Newcastle International airport, blamed the duty for why passengers could no longer fly from the city to Birmingham, Stansted, Gatwick and Belfast City. “The UK has the highest rate of aviation tax in the world, which significantly impacts growth,” he said.

Christine Ourmières-Widener, chief executive of the airline Flybe, which was saved from insolvency at the eleventh hour this year, said: “For Flybe, [the duty] is nearly 20 per cent of the average total fare, but it could be up to 50 per cent for promotional fares.” This month, Flybe said it would stop jet flights from four of its bases and shut those at Cardiff and Doncaster, while blaming a lack of pilots for a spate of cancellations this week.

The industry is concerned at the prospect of another tax. The government-commissioned Airline Insolvency Review, set up following the collapse of the airline Monarch in 2017, has suggested a levy on tickets, which would fund the repatriation of passengers stranded abroad if their carrier failed. The issue re-emerged after Flybmi collapsed in February.

Although passengers would ultimately pay, Tim Alderslade, chief executive of trade body Airlines UK, said this was part of “a drip feed of more and more expenses on to the carrier and at some point that’s not sustainable”. Train travel is both causing and benefiting from aviation’s discomforts. The number of “long-haul express” train journeys has grown by 40 per cent to 145m over the decade to 2017-18, according to the Office of Rail and Road, the regulator. Guy Stephenson, chief commercial officer at Gatwick, said BA’s closure of its service from the airport to Manchester came as Virgin West Coast railway improved its service. Broader economic and corporate trends are also diminishing UK air connectivity. For example, when Flybmi collapsed, it blamed the country’s impending departure from the EU for preventing it from obtaining flying contracts in the bloc. This was on top of the continued weak performance of the pound against the dollar since the 2016 vote to leave, which hurt because UK airlines’ revenues are generally in sterling and many of their costs, including fuel, are in dollars.

A former senior executive at Flybmi also said the cost of using the UK’s infrastructure — such as high airport charges, falling average ticket prices and competing sales outlets taking a cut of the fare — had contributed to routes closing. Meanwhile jet fuel spent most of 2018 between $80 and $90 per barrel and came close to $100 in early October; 18 months earlier it had been as low as $50.

Helping to slow the decline are government-subsidised public service obligation flights, said Robert Hough, chairman of Peel Airports, which owns Liverpool, Doncaster Sheffield and Tees Valley airports. The UK had 22 such routes and the end of last year, most of which serve Scottish islands, but the government also supports Flybe’s new route from Newquay in Cornwall to Heathrow, the country’s busiest airport. Heathrow is one of the few airports increasing its domestic route network. Airlines have recently launched services to Leeds Bradford, the Isle of Man and Inverness in addition to Newquay, and the airport has promised 200 more flights a week to UK destinations if its third runway is built, at some point in the mid-2020s.  It has also put £10m into a “route development fund” to support airlines operating new domestic routes.“I think we are worse than we were 10 years ago,” said John Holland-Kaye, Heathrow’s chief executive, “but better than five years ago.”

(Some para compression. Pasted in full as it's always random whether FT links get over the paywall or not).  It's interesting that only three weeks ago they were bragging about routes they are already stopping.  It may be more related to political posturing to support the third runway than anything else.

[John Wright]

34 minutes ago, Roger Mexico said:

I thought those particular slots can with the condition they had to be used for domestic (effectively connecting) flights.  You're probably right about the current service being a holding operation though - they've not exactly been doing much to push it.

It may be that they want to stop its use as domestic though, because one truth rarely discussed is that the number of domestic UK flights (which statistically includes those to/from the IOM and Channel Islands) has actually been falling over the last decade, even as UK originated flights have risen. This is from the FT last month which saves me having to unzip CAA files:

(Some para compression. Pasted in full as it's always random whether FT links get over the paywall or not).  It's interesting that only three weeks ago they were bragging about routes they are already stopping.  It may be more related to political posturing to support the third runway than anything else.

That’s what I thought originally. It appears it wasn’t the BM BA merger ring fenced ones. I think that asitis identified ( pages up ) that the IoM LHR slot was one sold by Indian based Jet Airways which was in difficulty ( and has since failed ) to Delta. Delta own a substantial chunk of Virgin which owns a substantial chunk of flybe. Delta couldn’t use it immediately so has sub let it to flybe for the summer. Think it’s called slot sitting. If you don’t use the slots enough ( 80% I think ) you lose them.

[Albert Tatlock]

Who wants to get into Heathrow at 6pm and miss numerous connections anyway? Few I would imagine.

[Andy Onchan]

12 minutes ago, John Wright said:

That’s what I thought originally. It appears it wasn’t the BM BA merger ring fenced ones. I think that asitis identified ( pages up ) that the IoM LHR slot was one sold by Indian based Jet Airways which was in difficulty ( and has since failed ) to Delta. Delta own a substantial chunk of Virgin which owns a substantial chunk of flybe. Delta couldn’t use it immediately so has sub let it to flybe for the summer. Think it’s called slot sitting. If you don’t use the slots enough ( 80% I think ) you lose them.

Frankly, I don't think there's any thought on the part of FlyBe to extend the LHR rotation beyond October, unless every flight between now and then is full. And I somehow doubt the same service will be re-introduced next spring either. 

Reading between the lines on various aviation and business websites FlyBe still have cash-flow problems, to the extent that they are considering action against credit card firms for funds held back prior to the takeover. They have already used up a significant part of the cash injection so I do 

I sometimes wonder whether the APD has been the catalyst for the demise of the passenger aviation industry. Airlines are cutting headline prices to the bone to keep prices under a certain level to maintain market share, but as APD is a fixed cost the room for creating profit to sustain service levels just isn't there. It's either down to PAX volume and/or deep pockets.  

[piebaps]

You're probably right there Andy. LHR isn't necessarily the destination everyone wants. Easyjet on LPL and LGW are consistently undercutting basic fares and the range of destinations available via other airports are taking business from LHR.

[Andy Onchan]

21 minutes ago, piebaps said:

You're probably right there Andy. LHR isn't necessarily the destination everyone wants. Easyjet on LPL and LGW are consistently undercutting basic fares and the range of destinations available via other airports are taking business from LHR.

I wasn't referring specifically to LHR when it comes to sustainability, it was more a comment about UK aviation in general. PAX volume, on whatever the route, seems to be the only way of staying afloat (sorry, wrong metaphor there!). If volume/critical mass is the only way to derive a profit then ultimately the UK domestic aviation industry is doomed to fail, especially those areas that don't have the volume like IOM/Scottish Isles/CIs etc. IMHO APD is a significant barrier to sustainable domestic airline growth.  

[Roger Mexico]

1 hour ago, Andy Onchan said:

I sometimes wonder whether the APD has been the catalyst for the demise of the passenger aviation industry. Airlines are cutting headline prices to the bone to keep prices under a certain level to maintain market share, but as APD is a fixed cost the room for creating profit to sustain service levels just isn't there. It's either down to PAX volume and/or deep pockets.  

Well airlines certainly love to blame governments for everything that goes wrong, rather than themselves.  That FT article certainly contains the usual cries that companies would make loads of money if only government would give them a lot of the taxpayers[1].  But if APD was such a problem then it would be hitting short-haul international flights as well and that's the area that has been going up by a lot - especially to Europe.  It's only really domestic travel that has problems.

Some of the reasons for that decline,such as the increase in train travel, are given in the article, but some others may be even more important.  The first is the decline generally in business travel as more  can be done electronically. Some still goes on, but people tend to make fewer trips.  Secondly the increase in security and the time spent getting through (and to) airports means that the time advantage in flying gets taken away for shorter flights and going by train or even road become as quick and less hassle.  Thirdly the ability to take international flights from more regional airports means there is less need for connecting flights - you can fly direct from Manchester, Glasgow or wherever, rather than flying to Heathrow and connecting.

The article is clearly part of a publicity drive to abolish APD on domestic flights post-Brexit (assuming that ever happens).  They couldn't do it when in the EU because they would have to do the same on intra-EU flights as well, and that would be a lot of revenue for the government to give up from routes where there is no financial pressure.  I doubt it will be successful as the Scottish Government has only just announced that it is no longer planning to reduce the tax there, on environmental grounds.

 

[1]  Actually airlines do quite nicely out of APD because they collect it for cancelled flights, but rarely pay it back.  And can still re-sell (or over-sell) the seats.

[John Wright]

But don’t forget, EasyJet does well on its domestic services, with some low fares, high seat occupancy, etc. 

Seems to be load factor , size of plane ( spreading fixed costs between more paying passengers ), number of rotations per day ( hours in air ) that are the important factors.

its expensive to operate 70 seaters, even turbo props, still need two pilots and at least two cabin crew, landing and parking fees are the same. Small jets are even worse because of comparative fuel inefficiency.

That being said I recently looked at an EasyJet flight, short haul, 2 hours, single, basic £80, flexible £805.

EasyJet have planes taking off at 05.00 and not others not landing until 02.00. Not all of them. It’d be interesting to know average daily hours. Flybe May get 12 or 13 max on IoM routes to Manchester or Liverpool. It’s another possible rotation, at least, and flybe under utilise anyway, because of lack of demand.

[Roger Mexico]

22 minutes ago, John Wright said:

But don’t forget, EasyJet does well on its domestic services, with some low fares, high seat occupancy, etc. 

I agree with the rest of your comment, but most of their 'domestic' routes are actually from England to other countries (NI, IOM, CI or Scotland) or between those places.  Travel by land and/or sea would be pretty lengthy and expensive.   I haven't checked all the figures but I suspect these have increased in line with short-haul travel .  I think the only all-England flight easyJet operate is BRS-NCL which has similar distance problems.  But they don't do 'classic' domestic flights.

Of course this makes the static figures for IOM even worse as easyJet have only just compensated for the fall in other operators whereas elsewhere may have actually added extra pax.

[doc.fixit]

On ‎4‎/‎4‎/‎2019 at 9:31 AM, Lxxx said:

Maybe she was a Branson agent sent in to drive the company down so they could sweep in and buy it for peanuts.

well they are in a bit of a pickle!

[John Wright]

59 minutes ago, Roger Mexico said:

I agree with the rest of your comment, but most of their 'domestic' routes are actually from England to other countries (NI, IOM, CI or Scotland) or between those places.  Travel by land and/or sea would be pretty lengthy and expensive.   I haven't checked all the figures but I suspect these have increased in line with short-haul travel .  I think the only all-England flight easyJet operate is BRS-NCL which has similar distance problems.  But they don't do 'classic' domestic flights.

Of course this makes the static figures for IOM even worse as easyJet have only just compensated for the fall in other operators whereas elsewhere may have actually added extra pax.

The number of intra England domestic flights is low, even those connecting to London, for any airline. The number of intra English flights connecting regional centres is very low.

BA do odd hops like Manchester-Cambridge, but after that it’s (mainly) Flybe to Exeter, Bristol, Southampton, Norwich and Cardiff from Newcastle and Manchester. There don’t appear to be any intra england domestic flights to/from Birmingham.

Birmingham presumably because it’s at the centre of road/rail connections and any flight under an hour, which would be all of them to English destinations would be quicker by train after you factor in travel to airport, check in and security, flight time and getting from destination airport to wherever you are going.

[madmanxpilot]

 

To be fair, the Flybe CEO does say a decision about continuing the service would not take place until much later in the season.

 

 

[Andy Onchan]

A picture is emerging on how a new FlyBe model could be shaping up. 

[GD4ELI]

2 minutes ago, Andy Onchan said:

A picture is emerging on how a new FlyBe model could be shaping up. 

Explain?

[Andy Onchan]

3 minutes ago, GD4ELI said:

Explain?

Well, if you're not close to the long-haul services operated by Thomas Cook out of London Gatwick, Manchester or Glasgow, then FlyBe could be used to feed those flights (possibly on a thru ticket?).