Thread: Flybe - 8
View Single Post
Old 2nd Jul 2016, 10:58
  #586 (permalink)  
eye2eye5
 
Join Date: Aug 2007
Location: North West UK
Age: 65
Posts: 183
LPL BHD

Originally Posted by Flightrider View Post
My goodness, with such a defensive response, one could be forgiven for thinking I'd struck a raw nerve. Displaying a tenuous grasp of airline economics like this hopefully isn't a sign that you work in Exeter.

It's quite straightforward really. The reasons for pulling off a route are broadly that it isn't covering its direct operating costs, so you're better off stopping as soon as possible and parking the aircraft; or that it is covering DOCs but not fixed costs, so you might keep flying until you are able to redeploy the aircraft into another market. Feel free to check out any airline business textbooks (Rigas Doganis is the most well-known author) and it will be covered in some depth. It is also a basic piece of economic theory in GCSE and A level economics about marginal costs of production and full costs, for any industry.

Once a decision has been taken to pull off a route, you then balance reputational inconvenience to passengers already booked in the short term against the losses incurred by continuing to trade in the medium term. Unless there are other factors in the equation, such as a competitor entering the market on a given date in future, a new ferry or high speed rail link which opens on a defined date or something of that nature which means a profitable route today will stop being a profitable route on that future date, you exit fairly quickly. Again, refer to any half decent airline economics textbook.

In this case, it's very odd. They have signalled an intention to pull off the route by stopping forward sales from February 1 2017. They clearly have alternate use for the aircraft given the wet leases being brought in to cover new routes but yet have an extended withdrawal period. All I can think is that it must be related in some way to a deal with LPL or BHD airports that they have to honour for a defined period of time?

Happy reading of Rigas Doganis literary output, by the way.
It is indeed an unusually long termination period. Option 3 concerns the rumour that RYR may return to LPL from Belfast. Whether that would be affected by the recent "no new aircraft for the UK" announcement I don't know.
eye2eye5 is offline