The Grim Reaper Flies By…Again.

It’s the aviation industry’s “Big C”.  Coronavirus, or to give it its official title, COVID-19, has the potential to have the same impact on airlines as it is having on mankind. The sense is that COVID-19 will impact those already impacted by other conditions; simply put the fittest survive; the weakest fail. It could be the same for airlines as the current epidemic and it’s associated impacts tips some over the edge.

Flybe appear to be in focus once again and maybe time has run out as the Grim Reaper pays another visit less than two months since the last knock at the door. However hard the current management team are working, events appear to be conspiring against them; no one could have predicted COVID-19 and its potential impact in early January. 

Much has been made of the recent efforts to start turning the business around, moving their Heathrow – Newquay service to Gatwick, some scheduling changes but nothing too significant in two months, but that would probably be a huge ask in such a short period of time. Previous management strategies are probably more responsible for the situation faced today than the recent efforts but that doesn’t help the dedicated workforce.

Consumer confidence appears damaged by the threat of COVID-19 leading to forward booking activity for many airlines falling by at least 25% in what would normally be a strong booking period leading up to Easter and the May public holidays. For any airline with cash draining out of the business a fall of that scale in bookings would be disastrous. The question we’d like to ask though is whether Flybe could have been more commercially astute?

We’ve had a look at some of their numbers. Firstly, 76 of their 96 routes in 2019 were operated without any competition; that’s a network with nearly 80% monopolistic opportunity. Normally that would invite a call from the competition authorities! With such a position you would expect the airline to maximise yields; but have they…

Our analysis of average fares from OAG’s Traffic Analyser shows that the average domestic yield for Jan-Nov 2019 was some $124 for those routes WITH competition and only $118 for those operated solely by Flybe. When you remove APD, Airport Charges etc, across many of their routes the net revenue to Flybe becomes around half of those yields. Flybe certainly do not appear to have abused their monopolistic position on that basis. 

Whilst the airline has frequently defended these yields by comparing themselves to other competitive forms of transport when railway operators are frequently charging fares two or three times high for peak time travel the logic of Flybe’s pricing just falls away. 

The apparent failure to secure a £100 million loan may be the final nail in the coffin for Flybe and perhaps the UK Government could have found a way to provide further support. However unfair that may seem when Alitalia and others limp along and survive it would hardly be fair on others at such a difficult time. Besides the threat of a Walsh and O’Leary double barrel would be enough to scare most politicians and regulators even at the best of times. 

If, or perhaps when the Grim Reaper claims Flybe, it will again be the dedicated employees who have worked tirelessly to save an airline that has seemed doomed to fail for quite some time. And when the Reaper leaves Exeter, Italy looks closed for business for the next few weeks so perhaps Alitalia will once again survive and offer a prayer up locally!