Flybe failure - an industry turning point?
Simon Miles
Miles Aviation Consulting Ltd | Managing Director | Business Owner | Ground Operations Specialist
I hate to see days like this. Over the years I’ve seen many come and go and now its Flybe. Like many, my heart goes out to colleagues affected. Kudos to organisations such as Loganair, Virgin Atlantic and others for rallying around attempting to backfill the void that these events leave. But whatever good work they can do, it’s never going to be enough. The damage is done.
It is possible that history may record that this event ultimately has a far wider ranging and more significant effect than Thomas Cook, Monarch and the others. Not only does it affect the staff of Flybe but also those of their supply chain and threatens the very existence of some regional UK airports. Previous failures were not quite like this one. Its not just the industry, its the UK economy.
Ironically, Virgin Atlantic themselves are now in cost cutting mode partly as a result of Flybe’s demise. BBC news reported today that the Virgin Connect consortium were a collection of strange bedfellows, from my view of the industry, I can’t disagree. It appeared to be a strange decision at the time.
We will continue to live in uncertain times and can, of course blame, COVID-19, Brexit et al for the assistance in Flybe’s demise. But our industry, and particularly the UK industry, is increasingly being defined by failure. Words such as ‘underestimation’ and ‘overreaching’ come to mind along with numerous questionable decisions.
After Thomas Cook’s exit, I posted that the industry must take a long, hard look at itself. Of course, its easy to sit out here in the ether criticising and making assumptions about what some individuals could or should have done. But let’s be honest; whatever the reason, the result is decimation, losing three large UK carriers in as many years, leaves a very large airline shaped hole in our industry. Now more than ever, we live in a world where only the strong will survive.
With complete respect for those affected, we now need to focus on the future to prevent more damage, we need to find a way to rebuild. Against the current backdrop this will be no easy task. As someone who works globally, I know that the UK aviation is very well respected by many overseas, but for how much longer? So, do we just look after ourselves or de we come together?
This is a time for calm heads and strong will. I urge significant and well-respected UK aviation business leaders to not only take a long hard look at their future decisions but to step forward and consider not only the potential effect on their own organisations but also that of the UK industry and the UK economy as a whole.
Non Executive Director at Red Sky Personnel
4 年Simon as always you are spot on when it comes to tie aviation world. There is no doubt that things will not quite be the same for a good few months yet. It will I am sure get worse before we see it getting better. As always the strong will survive and the weaker airlines will go under. However you could say that is the nature of the industry. I do believe that many the things that are currently carried out within the airlines will be outsourced to further reduce costs and headcount. Airlines will get stronger by reshaping to meet their customers and investors needs. Will they be profitable in the short term we will have to see but I am sure they will be leaner in terms of headcount and even more focused on costs. Will what you have suggested happen I would not put your mortgage on it. Opportunities will be there for the stronger airlines to grasp to improve their market share. As we know if you do not control your costs the result will be obvious. Great comments from you as always . Let's see how the story ends.
Accountable Manager @ Svenskt Ambulansflyg | Aviation Emergency Medical Services
4 年I love your passion and insight.
Aviation Professional
4 年Well said, Simon. This is bigger than financial struggle of an airline. This is a reflection of the mind set of decision makers and weakening UK economy. Most European countries have lower APD and further discount schemes on domestic tickets, airport and fuel taxes to support sustainability of domestic travel.
Aerospace Consulting and Labor Arbitration
4 年As Warren Buffet, one of the world's canniest investors, has noted "A truly great business must have an enduring “moat” that protects excellent returns on invested capital.”? The "moat" Buffet refers to is a high Return on Invested Capital (ROIC) not just good quarterly earnings. While cash flow is certainly an important aspect of any airline's existence, enduring value and long life is assured by maximizing the contribution and productivity of the airline's principal assets (its aircraft, slots and routes). That effort will then generate a return in excess of its weighted average cost of capital. While I don't have the data necessary to calculate FlyBe's ROIC I would surmise it wasn't sufficiently in excess of its capital costs. As soon as cash flow started disappearing as a result of the near-term reduction of RPK's, the enterprise quickly became untenable.? Unfortunately, my experience is that a number of airline senior executives focus a lot of their efforts on the short-term fix to the P&L and not enough on improving the long-term health represented by the balance sheet. I suspect much of that focus is driven by pressure from stakeholders/shareholders whose investment window is only a few quarters, not years. A desire for short-term returns rather than longer-term enterprise viability has taken a number of airlines over the edge.
Helping build successful clients. * Aviation, Marine & Trade Finance Foreign Exchange Transactions * Aerospace Consultancy * International Development * EU Transition Advice * Business Growth
4 年Simon a very well written assessment of current state of play.