Flybe targets aircraft reductions after finally hitting "peak fleet"
Flybe has reached “peak fleet” in April 2017, with a reduction of 10-15 aircraft expected in the near future, according to Vincent Hodder of Flybe who spoke at Routes Europe 2017.
The airline’s chief revenue officer outlined how the airport has suffered financially from over-expansion; a strategy which needs to change.
“A major challenge we faced was having 50 Embraer 175s the business didn't want or need - it very nearly killed the business and it's taken us three years to ameliorate,” he said.
“Literally this month we have reached peak fleet, at 85 aircraft, so what you'll see now is that our fleet base will decline. By the end of this year we'll have reduced the Q400 fleet by about six aircraft, but by 2019/2020 we'll be at a core profitable number of about 70/75 aircraft.
“We now have a very clear strategy about returning to the roots that really work for us as a business; our current level of new route development is simply too high."
A similar message was delivered by Wolfgang Reuss, SVP network management at airBaltic, who said fleet rollover was the major issue the airline faced.
“We will not make the mistake of overgrowing that we have in the past - that nearly made us bankrupt. We will focus on sustainable growth,” he said. “We've had 12 new routes this year - that's always good in the headlines but where the real growth comes in is our existing network."
The airline is currently replacing its fleet of 12 737s to Bombardier CS300s, and Reuss said the change is proving to be a success.
“It's very different to compare the costs; but we now have three aircraft in service but what we see already in terms of the pure aircraft it's actually exceeding our economic expectations - and our expectations were high,” he said. “We're quite happy with the aircraft - the different in percentage terms has never fallen below double digits."
The panel session - entitled Industry Challenges Part 1: Capacity, Congestion, Competition - Current Challenges for European Aviation – also discussed the damaging impact uncertainty is having on the industry.
"The margins for airlines are so fine that the sheer volume of challenges keeps me awake at night,” said Hodder. “The biggest issue is the rising level of uncertainty, whether that's cyber security or Brexit. The problem with uncertainty is that some people choose not to travel - and that reduces demand."
"The actual outcome of Brexit is not going to be a problem for us; airlines will adapt whatever the new regulations are. The main problem is the uncertainty which Brexit creates.”
From an airport perspective, Uel Hoey, business development director at Belfast International Airport, outlined the knock-on effect of this uncertainty.
"If an airline is concerned about uncertainty, then we'll have to take the effects of that,” he said. “The biggest point that is a concern to us is that we're a UK jurisdiction on this island. The short-haul APD means that we don't have a level playing field with our competitors in Ireland."
"Our aeronautical revenue has dropped significantly. I would guess that outside of Heathrow and London City all UK regional airports are in the same position, and that's a non-reversible process. We've had to reach out to our government and tourism partners to see how we can help to bring more people to the airport. We're an island off an island off a continent - the economy is not going to improve unless we can get people to fly here."
Costs and management was a major theme of the discussion, with Jeroen Erdman, Head of Network Planning, Transavia, outlining ongoing issues with airport fees.
"We're selling flights at less than the tax we pay and hoping to make some money on sandwiches or luggage,” he said. “Wouldn't it be great if there was a system where if air fares are really low, then the airport charges are really low too, rather than a flat fee? For airports the actual cost per passenger is very low."
Hodder agreed with the need to create a new way or working collaboratively: "Airports only benefit if airlines bring in more passengers. Airlines only benefit if each route is more profitable. Airports must find a way to reduce costs per passenger so we can fly more people through the airport. Additional passengers are only going to come if costs go down."