Originally Posted by
Atlantic Explorer
Agreed. I think the fact that the new owners have virtually done nothing to slash the cash burn and alter the business model into something worth fighting for says a lot about their intent. The company is losing huge amounts of cash every day, yet their silence is deafening. It’s a very sick and dying animal and the vets are standing by watching it die!
The latest ‘Cap in hand’ to the airports over unpaid handling fees is just preposterous given the wealth of their owners and really shows how ridiculous the whole situation has become. I feel for the employees who must be worried sick about their future.
Here's one possible scenario to explain the "doing nothing".
Flybe launched Heathrow to Aberdeen and Edinburgh in March 2017. The press release from December 2016 is
here and says, among other things:
Flybe will operate the slots which became available as a result of commitments required by the European Commission following the acquisition of BMI by International Consolidated Airlines Group. Flybe is not required to pay to use the slots, other than meet Heathrow landing and passenger charges. The slots will not be purchased by Flybe and will therefore not be brought onto the balance sheet.
The commitments referred to are the slot-release commitments which IAG gave. The European Commission's full analysis of the BMI takeover is
here (all 196 pages) but of particular interest (in the present discussion at least) is paragraph 644 on page 148 (my emphasis below):
1.1.3. Grandfathering rights
644. As a general rule, the slots obtained by a prospective entrant must be operated on the city pair(s) for which they have been requested from IAG and cannot be used on another city pair unless the prospective entrant has operated them during at least six full consecutive IATA seasons ("the Utilisation Period").The prospective entrant would be deemed to have grandfathering rights for the slots once appropriate use of the slots has been made on the city pairs at issue, for the Utilisation Period. Once the Utilisation Period has elapsed, the prospective entrant would be entitled to use the slots obtained on the basis of the Commitments exclusively to operate services on any route connecting London with any other part of Europe (including Aberdeen and Edinburgh), or on London-Moscow, London-Cairo and London-Riyadh.
Flybe started operating the slots at the start of S17, i.e. 26 March 2017. Six consecutive IATA seasons therefore elapse at the end of W19/20, i.e. 28 March 2020. With effect from the start of S20 (29 March), the slots can be used for any European destination from LHR (or MOW/CAI/RUH).
It seems to me that
Heathrow slots are by some margin the most valuable assets which Flybe holds (even if they are not currently on the balance sheet - which is correct in accounting terms but also very convenient at the moment). The fact that they will be limited to European routes is neither here nor there - if someone wanted to use them in future for long-haul routes, it would be possible to do a swap with a carrier holding normal unrestricted LHR slots and which is unlikely ever to want to fly long-haul from Heathrow (e.g. Air France, KLM,...).
I believe (but am open to correction) that Flybe originally received 3 weekday Heathrow slot pairs for ABZ and 4 weekday Heathrow slot pairs for EDI. The Wikipedia table linked to above shows historic Heathrow slot prices. Even if we assume a very conservative £15m per slot pair, that's still over £100m, enough even to pay the APD bill
. (Factors tending to reduce the price: Flybe has fewer slots at the weekend. Factors tending to increase the price: the slots include a desirable 0800 and 0900 arrival into Heathrow.)
For Flybe and its owners to gain access to these very valuable slots, Flybe has to keep operating until 28 March 2020 (or, to be more precise, until it has flown enough of the W19/20 frequencies under the 80/20 rule to gain grandfather rights, so probably a date somewhere in the first half of March, depending on how many cancellations or off-slot operations there have been in the season so far. You can bet that someone in Flybe, and someone else in ACL, is watching and counting VERY carefully).
If Flybe fails before that, it loses the rights to the Heathrow slots, its most valuable asset. If it keeps going until after that date, Jackpot! A quick slot-transfer transaction to hand the slots over to a friendly party, and Flybe will have fulfilled its role as an organ donor (slot donor) for its owners. And if having done that it then falls over before it manages to pay all those other bills, oh well, at least the owners will have the slots with which to console themselves.
At least that's how I see it (and I hope I am wrong; I think it would be disgraceful and disingenuous were the owners to do this). By all means disagree with this scenario, but then please tell me what's wrong with the above reasoning.