Originally Posted by
old,not bold
I watched with astonishment a discussion on BBC Southwest this morning about Flybe; 3 or 4 so-called experts, each with an agenda. None of them, nor the presenter, appeared to understand that Flybe is a conglomerate of several businesses, including, of course, the Engineering.
Ever since being closely involved with persuading Jack Walker to merge his 2 airline acquisitions into one, based at Exeter, in the 1980s I have watched with despair successive CEOs/Board of Directors screw JEA/Flybe up, as they massaged their own ambitions.
Not one of the "experts" this morning mentioned the self-evident truth that Flybe's problems stem from this dreadful management over the last decade, or even further back to the unlamented Jim French. A series of ridiculous decisions that had a lot more to do with management egos than common sense, eg acquiring a much larger, failing, airline and fleet in the childish belief that it could be absorbed painlessly into the company. That went well, didn't it.
Of course taxpayers' money should not be used to get the current owners out of the financial mess they bought in to/created. But there is a "national interest" case for financial support for routes that contribute to regional economies by providing connections between regional centres and between them and hub airports.
If Flybe were to be slimmed down to what it does best, regional scheduled services on routes where the Dash 8 is economic, forget the "me-too" leisure routes aimed at competing pointlessly and hopelessly with Easyjet, Jet2, and Ryanair, and lose the jets acquired for that purpose, it could be a viable operation, with the engineering as a profitable contributor. It would need financial support initially, from the taxpayer.
But to do that with taxpayers' funds without the present owners getting one penny of benefit means that the Government must do what it did with the banks; acquire ownership as a condition of the support, then slim it down to a profitable regional airline with only the Dash 8s, and then sell its shares back to the public when they have a value, to get the taxpayers' money back.
This is a well-tried model and it works. But will BoJo's team have the nous, experience or ability to carry it off? NO. What a pity.
The number of "regional" routes that can justify double daily Dash-8 and not be pounced on once the traffic is up and running by a loco runnng a 737/319/320 are very limited. Unfortunately economics in the airline business is now in the far right sector of the product life cycle curve - everthing tends to the lowest cost, most efficient and in the airline business that is 737/320. if you can get enough to run a dash-8
profitably, you can run a 737/320 picking up premium flexible fare-payers for the business element with the £25 each way fill ups generating student, VFR and other business traffic that is less time sensitive. The price elasticity of demand at £25 one-way is quite high, generating a lot of traffic that even £50 one way won't.
Go on a loco Mondy morning and see the electricians/plasterers/roofers etc. heading somewhere for a week's or even a day's work. They wouldn't be there at Flybe Dash-8 prices. Companies no longer need regional offices if there is a direct flight for an installation/repair engineer
I can do Bristol to BFS on easy for £60 return, look at Flybe Birmingham/BHD and it used to be 3x that price. Today it is £30 each way. Was that bad pricing/marketing, wrong aeroplane or the wrong business model? Easyjet (and others) have designed their business to be low cost - everything is low cost. Put on a flight, market it, get load factor at 95% and see if the yield comes up to make it worthwhile. If not move the asset somewhere else. That is 21st Century short-haul in a nutshell. If the government wants to support regions, then have government owned airports, free landing fees and maybe subsidise route start-ups for a year. How to make a small fortune? Start with a big fortune an buy an airline.
The previous management of Flybe got their strategy wrong and also didn't build in any get-out option (i.e. breaking leases on the wrong aeroplanes). I feel for the staff but there are only two options;
The current owners weather the strategic setup until they can change it; I don't know the detail of the leases/end-dates etc. so I have no idea how long this is. But they have just got 4 slots at LHR which must be worth several £millions (by moving NQY to LGW).
It goes bust and someone starts again (pre-pack insolvency, not likely now that a deal has been done with the government).