From yesterdays Scotsman
Ace of no-frills dogfights says sky's the limit
BUSINESS IN PERSON
ALASTAIR REED
MAJOR airline expansion at a time when oil is hovering stubbornly around the $55 mark does not conform to conventional wisdom.
But Tom Dalrymple, founder, owner, chairman and managing director of Flyglobespan, Scotland’s fastest growing low-fares airline, does not subscribe to convention.
Dalrymple, who describes himself as a "grassroots, groundfloor kind-of-a-guy", founded the Edinburgh-based no-frills airline in March 2003, at a time when the industry was awash with hopeful newcomers. Two years on many of the company’s peers are struggling, and one, Duo, has gone.
In contrast, this week Dalrymple announced his firm’s biggest expansion to date.
Seat numbers from the group’s Edinburgh and Glasgow hubs will more than triple to 1.5 million a year from 26 March 2005. In addition, five new routes have been added to its existing 12 destinations, and three new planes have been ordered from Boeing.
All this at a time when the price of oil, which has risen 65 per cent since the beginning of the year, is hitting new highs almost daily. Aviation fuel prices are directly linked to the price of crude oil, and most European airlines are struggling to break even. Only two weeks ago Goldman Sachs slashed its earnings forecasts on European carriers for this year and next, and warned that if the "high oil forward curve is right, the sector could nosedive again", adding that the industry "is not built for $30 oil, let alone $50".
So how does the man in the corporate cockpit describe the decision-making process he went through before announcing Flyglobespan’s expansion?
"It was a no brainer," he says. "It’s not stressing anyone in this organisation at all. Quite honestly, it’s just another easily taken step.
"All that we’re doing is padding out everything that we’ve tinkered with already, made it more customer-friendly, and added more flights to more destinations with more choices. Nothing terribly new, really."
Sitting in the group’s fortress-like headquarters in Edinburgh’s picturesque Colinton Dell, Dalrymple comes across as surprisingly modest and approachable for one of Scotland’s richest men. But as soon as he starts talking about his company, the passion is there in abundance.
He does not lack ambition either. For a man who spent the first 13 years of his life as a travel agent, Dalrymple is clearly bracing himself to take on the global airline industry. This week’s announcement, he says, is just the tip of the iceberg. In addition to European expansion, the US, Canada, South Africa, Australia and the Caribbean are all destinations to be added to the group’s schedule, starting within two years.
So why is Dalrymple, who founded tour operator Globespan in 1974, so confident of his company’s prospects, when the rest of the industry is in turmoil?
He says the primary reason is that Flyglobespan has exactly what the consumer wants.
"Even though we’re barely two years old, I’m not surprised at how far we’ve come," he says.
Although Flyglobespan does not compete directly with Ryanair or EasyJet from airport to airport, it does compete on general routes. For example, whereas Ryanair flies from Prestwick to Gerona, Flyglobespan flies directly from Glasgow to Barcelona, and Dalrymple says that is his selling point.
"Unlike the Big Irishman [Ryanair’s chief executive Michael O’Leary] we fly from main city to main city, but at the same low cost."
Dalrymple is well aware of the repercussions of a high oil price and says Flyglobespan is in prime position to take advantage of the changing industry environment.
The group has hedged about 90 per cent of its fuel requirements until spring next year, and already has about 25 per cent of next summer’s requirements, with the remaining 75 per cent insulated through a range of price caps and corridors.
"Oil is going to come down again," Dalrymple said, "but probably not that far. The days of gas-guzzlers are over. They’re never going to get back into the sky. The industry has changed for good. And we’re growing at the exact time when a whole new generation of planes are coming along."
Flyglobespan has just ordered three hi-tech 737-300s from Boeing, and Dalrymple says he expects to order more in the near future.
"The philosophy is that when you start a new route, you use the older planes and load them lightly. But that’s not the way we do things - you’ve got to have fuel-efficient planes."
Flyglobespan will contribute about half of parent Globespan’s £120 million turnover next year, and Dalrymple is well aware that the airline "is the animal now". So what is the future for Flyglobespan, which Dalrymple admits is a "miniscule fish in a very large pond"?
"By comparison to [Ryanair] him, we dabble in it. But as the name suggests, we’re going to become a global company," Dalrymple says.
He is currently the group’s sole shareholder - or "benevolent dictator" as he describes it - but he says "it is not inconceivable" that at some point the group may look to the stock market for extra money.
Dalrymple says he is more than happy with the group’s prospects. "It’s going to be the guy with the leanest, meanest machine who is going to be able to live in a fresh-air environment. The ones with heavy overheads will suffer. We feel confident."