The sense is that Covid-19 will affect 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 its associated impacts tip some over the edge.
Flybe is in focus once again and time has now run out, with the Grim Reaper paying another visit less than two months since the last knock at the door. However hard the current management team worked, events appeared to conspire 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 Flybe’s business around, moving its Heathrow-Newquay service to Gatwick, some scheduling changes but nothing too significant in two months. 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 did they?
Our analysis of average fares from OAG’s Traffic Analyser shows the average domestic yield for January-November 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 became around half of those yields. Flybe certainly did not appear to have abused their monopolistic position on that basis.
While the airline frequently defended these yields by comparing itself to other competitive forms of transport, when railway operators were frequently charging fares two or three times higher for peak time travel, the logic of Flybe’s pricing fell away.
The apparent failure to secure a £100 million loan may have been the final nail in the coffin for Flybe. Perhaps the UK government could have found a way to provide further support, but that seems unfair when Alitalia and others limp along and survive. Besides, the threat of a Walsh and O’Leary double barrel would have been enough to scare most politicians and regulators even at the best of times.
In the case of Flybe it is again, though, the dedicated employees that are the real tragedy in all this. They worked tirelessly to save an airline that has seemed doomed to fail for quite some time.
John Grant is a senior analyst at OAG.
