Duo's Demise (2004)

[George Tower]

Old news I know but it seems from searching the web that there is precious little information out there on the cause of the precise cause of corporate failure.

Obvioulsy cash-flow is the life blood of any business but given their unique market positioning, relative health of the economy, did they just read the market wrong or what?

If any one has any info on Duo it would be good if you could post it.

Rgds

GT

[Localiser Green]

Not always the most reliable source, but Wikipedia summarises it quite well:

"The airline was formed by a management buyout of the former Maersk UK in June 2003. The airline relaunched services in November 2003 but a shortage of funds led to it suspending flights and entering administration on 1 May 2004.

"The airline sought to provide a high quality of service at moderate prices, but faced a marketing challenge in explaining that it was not a £9.99 no-frills carrier, and load factors took longer than expected to reach budgeted levels. Despite overwhelmingly positive reaction from passengers and an encouraging future outlook, the airline had to close down when an investor withdrew support at short notice...."

(my emphasis).

http://en.wikipedia.org/wiki/Duo_Airways

[WHBM]

There are always a whole range of different opinions on such matters, often completely contradictory. So here's mine.

A company goes out of business because they don't get enough money in to cover the money going out. It is the job of management to keep on top of this, ensuring they have sufficient reserves to cover fluctuations in revenue, unexpected costs, bad decisions, etc. It is like this anywhere, aviation or otherwise.

The old Birmingham Executive was a small-scale operator which took on big-airline aspirations. They sold out to Maersk, a major Danish business with lots of financial reserves, and they turned their operation into a BA franchise from Birmingham, which always adds more to revenue. Despite all this, the operation never made Maersk any money and they decided to get rid of it.

The management decided that, while they had lost money as a franchise operating in the name of a worldwide airline, they could somehow turn it all around by going off on their own under an unknown name. They also decided that while they had lost money using a secondhand fleet handed down by Maersk (doubtless at a good price) they could now make money by going out and buying brand-new kit in the shape of the CRJ-700, not really a start-ups aircraft.

Then they decided to get into routes rapidly rather than steadily and easily.

Finding Birmingham couldn't deliver them profits they cast around for other places like Edinburgh, which just added marketing and operating overhead.

Then they ran out of the cash they didn't have too much of in the first place. And that is that.

[Avman]

The real reason isn't as profound as the above. They just had a damn awful livery!

[OPS1978]

duo was a great airline and great people who flew for them one of my best friends was one of the senior (Captains) pilots with them. Dave Roberts if anyone remembers him such a shame they didnt make it on there own they deserved too.

Great people.

rip duo

[Daza]

I travelled frequently with this airline as Birmingham European,Maersk Air and Duo.The service was always excellent. Great people,some of the destinations ie; ATH,VCE,VIE were great. Many airlines currently operating from major UK airports could lear a lot for following their excellence in customer care.
RIP BEA/MAERSK/DUO
Daza

[dv8]

I always thought the advertising was naff A billboard by the motorway with something about ducks? WTF

The logo painted on the a/c that you could only see under certain lighting conditions

RIP Duo Gill Debonair etc

[Hotel Tango]

Many airlines currently operating from major UK airports could lear a lot for following their excellence in customer care

Agree, but good customer care costs time and money (such as well paid motivated staff), which is why I suppose most airlines don't give it anymore. Still, if people want to fly for peanuts this is the outcome.

[George Tower]

Prior to DUO's demise what kind of loads were they getting and kind of fare were they charging a typical punter?

Was it a case of DUO having a viable model and simply needing investors to stay the course or was DUO always a destined to be a dead-duck?

[groundhogbhx]

Loads on most routes were improving and some, TXL especially, were often full. So money must have been coming in, just not fast enough to cover what they owed Most staff seemed to think that if they had got the extra cash being promised it wouldn't have been too long before they started to make money instead of losing it.

[Cyrano]

WHBM:
Kudos for a reasonable stab at a summary, but I hope you'll forgive just a couple of little amendments:

The management decided that, while they had lost money as a franchise operating in the name of a worldwide airline, they could somehow turn it all around by going off on their own under an unknown name. They also decided that while they had lost money using a secondhand fleet handed down by Maersk (doubtless at a good price) they could now make money by going out and buying brand-new kit in the shape of the CRJ-700, not really a start-ups aircraft.

Maersk Denmark decided they wanted to sell their UK arm. Finding no buyers, they said to the UK management, "do a management buyout if you want, otherwise we'll close it down."

The CRJ-700s had all been ordered and delivered while the company was still under Danish ownership. It was made very clear (by Denmark) that any proposal for a management buyout would have to take on the leases on the aircraft. I can assure you categorically that had the Duo management team been given the option to source other aircraft, CRJ-700s, whatever their qualities, would not have been the first choice.

And finally...you're quite right that the company had never made money as a BA franchisee. This was at least partially due to BA's habits as franchisor, first, of limiting Maersk Air UK's ability to expand ("you want to fly BHX-Malaga at your own commercial risk?" [at a time when no-one else was and there were still 737s in the Maersk Air UK fleet] "We can't let you do that. It might upset BA people in Gatwick which isn't expanding") and second, of periodically taking profitable routes off Maersk Air UK and handing them over to that paragon of wholly-owned efficiency BA Citiexpress.

It's water under the bridge, anyway. Duo was a couple of months away from turning the operating cashflow corner (helped inter alia by better-than-expected Edinburgh results!) when it closed after an investor got cold feet. (Wikipedia's right there.) Would it have survived longer-term? I'm not sure. In particular I'm not sure that the CRJs would have managed to keep flying profitably through the current oil price environment. But (to nail my colours to the mast) I believe it was the right decision to try to form a going concern out of Maersk Air UK (constraints and all) rather than just accepting the parent's desire to shut it down. Duo made a number of wrong decisions (especially apparent in hindsight), but nonetheless in a relatively short lifespan created a different kind of service which was appreciated by its customers (evident from the rising passenger and yield numbers and by the unbelievably positive customer feedback) and by its very hard-working and dedicated staff.

Respectfully
C.

[George Tower]

Thanks for your replies.......

Cyrano you were obviously quite close to Duo....can you shed any light on what kind of yields they were getting, and whether they operated their high yield model with direct competition with other carriers on any of their routes?

wrt the CRJ700 (and 200s) you allude to the fact they weren't necesarily first choice of kit.....why do you say this? And what would have been a better choice for their schedule/routes?

Thanks for all your replies.

Rgds

GT

[Bagheera]

George, not the kind of answer you are seeking but as an EDI ATC'er, I always found DUO to be a very professional outfit. great crews, excellent reliabity and punctuality. Myself and many of my colleagues were very suprised when we arrived at work to hear their aircraft were impounded. They had high load factors even when opening new markets and now with hindsight if you look at the routes they operated out of EDI, more established carriers have jumped in to fill the void. Know nothing of the financial side but truly believe that they were unfortunate to start their routes out of EDI before the Scottish executive grants became available.

[WHBM]

Cyrano, thanks for the corrections about the CRJ-700 chronology, I should have checked instead of working from memory. Interestingly several of these have never found new homes and, more than three years on, are still stored belonging to Maersk's finance offshoot. So maybe they would have been better to have let Duo's business roll on.

But then, if Maersk corporate (no fools in the business world) decide not to put any more money into it, and then subsequently an independent investor decided not to put any more money into it, maybe that tells us something. I am sure that service style, etc, was done all very nicely, but if the investors cannot make any money, what's the point ?

High load factors maybe, but at what fares/yields ? Also you often find that "high loads" can be a partial view, it's only on a limited amount of the total network, or it's certain departures only (eg "they're always full on Friday night"). You need the complete picture.

[OltonPete]

STATS

Some figures from the CAA for March & April 2004

April - BHX

Vienna 1746 with 52 sectors at 34 per flight - No competition
Helsinki 1939 with 45 Duo & 44 City sectors averaging 22 pax
Lyon 3578 with 108 sectors averaging 33 per flight - No competition
Berlin 1886 with 52 sectors averaging 36 per flight - No competition
Cologne 1985 with 80 sectors averaging 25 per flight - No competition
Stuttgart 6571 with 224 sectors averaging 30 per flight - 138 BA 86 DUO
Stockholm2388 with 174 sectors aver 14 per flight - 90 Duo 84 Skyways
Oslo 1672 with 47 sectors averaging 35 - No Competition
Geneva 3428 with 109 sectors averaging 31 per flight - No competition
CPH 10625 with 216 sectors avg 50 per flight 90 Duo & 126 SAS

March

Vienna 1797 avg 29
Helsinki 2294 avg 22 - 54 DUO 49 City
Lyon 3711 avg 32
Cologne 2469 avg 25
Berlin 2391 avg 26
Stuttgart 6516 avg 26 98 Duo & 150 BA
Arlanda 2524 avg 22 100 Duo & 14 Skyways
Oslo 622 avg 15 ????????????????????
Geneva 3979 avg 34
Copenhagen 10763 avg 46 133 Duo & 135 SK

March - EDI

Munich 100 - 6 sectors avg 17
Milan 1237 - 54 sectors averaging 23
Oslo 1446 - 54 sectors averaging 27
Geneva 2635 - 73 sectors averaging 36
Zurich 1237 - 54 sectors averaging 23

Just goes to show that it was just not low pax figures although they are not great considering most lead in fares at about £100 return from memory.

Some basic errors such as Cologne and I am surprised that it averaged
that many as my old next-door neighbour (FO with DHL) used it quite
often and single figures or high teens were the norm.

With Stuttgart & Copenhagen I suppose they could get a share of
the booty but going up against SAS & BA respectively was not ideal.

The other aspect is if they had to take the leases then they had to fly somewhere but a slightly smaller operation would have been better
and as most have said with probably different aircraft. Some of the figures
were showing signs of hope but Lyon & Vienna were the only routes snapped up afterwards, then CGN (Germanwings), Berlin (BACON) & Geneva (BACON).

Pete

[Dick Fisher]

My only experience of Duo was a flight to Geneva and back. Very early check-in at Birmingham and only a handful of us walked out to the aircraft.

I had just about settled into my seat, when there was a PA announcement from a female cabin crew member, who unusually, was at the rear of the cabin (so out of my sight.)

"Good Morning L&G and welcome to this Duo flight to Edinburgh". Slight moment of panic before I was able to quickly check with the CC member at the front of the cabin, who was happy to confirm the actual destination was Geneva. He hadn't been paying attention and had completely missed the Scottish reference!

[Cyrano]

Originally Posted by WHBM

High load factors maybe, but at what fares/yields ? Also you often find that "high loads" can be a partial view, it's only on a limited amount of the total network, or it's certain departures only (eg "they're always full on Friday night"). You need the complete picture.

Quite right, sir, and I for one would never make the "high load factors" claim for Duo . In fact neither load factor nor yield had made it to the budgeted level, although both were improving.

Incidentally there was a good argument for starting a smaller operation, except that the fixed overhead, when spread across a smaller fleet, made profitability not merely challenging but impossible. As you say, "if the investors can't make money, what's the point?" I think the management team recognised how difficult it would be to succeed, but nonetheless felt it was preferable to try to keep going (also in order to try to preserve most of the jobs) rather than just to shut down when Maersk couldn't find an established buyer.

Brgds
C.

[TartinTon]

Duo and the whole Maersk saga are quite unfortunate. Under the franchise agreement with BA they were effectively hamstrung, operating routes that BA deigned to allow them and even taking profitable routes off them to give to their ailing regional carrier i.e BHXFCO. As has been pointed out, when they wanted to operate routes like BHXAGP they were told they would be encroaching on other franchise agreements (not that GB had any plans to start routes out of BHX).
It is a fact that they were offered the chance to become BMI regional/BmiBaby by BMI under a different type of franchise agreement but Maersk Denmark refused as it would have meant the name Maersk disappearing (not that anyone knew who Maersk were!). All-in-all it was a professional outfit but was living in the past to some extent and it was this inability to recognise the shifts in the market and react to them that ultimately led to its downfall.

[clevis pin]

Planned to fail ? Surely not !

As a start up would you - if you had a commercial type brain do the following;
1. Advertise in such a manner that nobody could work out what duo.com actually was. A picture of a DUCK - no routes or anything alluding to it being an airline.
2. Not have a call centre and relying on the on-line bookings. Not every body has the internet. Also not being registered with Oporto / Expedia etc.
3. Deciding to paint the 5 (I think) CRJ 200's at around £20,000 a pop even when they were being returned to the lessor in about 6 months !!!
And of course the return conditions being 'a white repaint'.
4. Also fitting out the cabins of the 200's in leather and new trim/carpets. Another waste of money we did not have. Word to the wise - keeping BEIGE carpet clean during the winter on walk up aircraft is totally impossible.
5. Considering the whole BA database of passengers was contacted (allegedly) about duo operating the routes, we were flying with 2 or 3 passengers for many flights which were operating at 50%-60% load factors prior to the mis-managment buyout.
Explain to me why it took so long for the CAA to grant the new AOC – did they have concerns about the financial side?
If Maersk had closed the airline all employees would have received a full redundancy package + shut down costs etc - an expensive process, an estimate was £40 million.
Based on the assumption that the airline never made any money and never will –
How about paying a few directors to take over the airline and dissolve the previous owners of liability for the redundancy/shutdown, the directors walk away happy after the 'unexpected' demise leaving the rest of the workers up the creek with no paddle.

I'm really sure that didn’t happen as the directors were all very kind, considerate human beings - but they must have been very clever or total imbeciles at –
1. Bean counting as no effort was made to cut costs, if fact thousand were spent on aircraft which were leaving the fleet.
2. Advertising - 'When did you last feed the ducks' - 'When did you last fly to Geneva' would have been better.
3. Contacting previous passengers - If duo were the only airline on that route why were we flying 2's & 3's ?
I leave you to your own conclusions – but I think BMI employees had better take a look at the new joiners to their company, its surprising how the same names pop up!
Gravity’s a myth – the earth sucks!

[Geoff44]

Agree re. advertising

Have to agree that the adverts placed for the new and unknown airline were terrible. I seem to remember that one of them featured falling leaves , as was mentioned previously most passengers would not have known the name Maersk let alone Duo. Great shame as they had a lot of good people working for them.