Thursday 5 March 2020

Flymaybe no more

Well, Coronvirus strikes! It has not killed anyone yet int he Uk but has taken a corporate victim. Flybe was in a poor state anyway, needing tax holidays and more investment to try and keep going but the collapse in bookings has done for it.

I hope that there is a chance of a phoenix rising from the ashes to take over the profitable routes (hmm, are there any I wonder) and slots to try and keep the regional air capacity going. However, with the virus about to hit I think this is unlikely and a decision by a Private Equity house would be needed in the next day or two. So sadly, a wind down and sell-off is most likely.

That means the more likely scenario is a bunch of small start up's trying to cherry pick routes and lease planes for the forseeable in the regions - so in the short terms there will be a big undersupply, especially with the virus putting off new entrants.

This may well impact on ariport viability - perhaps here the Government should step into at least help with the costs of mothballing facilities for a a few months until some more services start running again.

In the medium term, trying to be optimisitc, we might find that Flybe's oligopolistic position was the cause of its donwfall. More nimble and smaller suppliers who do not try to create demand but to service it might mean we end up with leaner routes but better services. I can see it being more pricey as after all Flybe was losing money hand over fist as a company so something was wrong with with the financial model (sometimes of course this is just debt loads after long-term mismanagement).

Plus, having flown Flyeb a few times, the abysmal customer experience surely can't be hard to improve on for any new entrant.

It will be interesting to see the capitalist response to the demise of Flybe.


Lord Blagger said...

A more accurate comment would be that FlyBe was taxed into bankruptcy

Anonymous said...

All airlines are suffering. There is a Dubai based airline who are shedding staff in a rather ruthless (from a western point of view) manner. You are only seeing the tip of an iceberg.

Penseivat said...

I understand that Virgin Atlantic are now taking the Gatwick and Heathrow slots used by flybe, something worth about 65 million Pounds. I know thqat Virgin did put money into the airline, but was it as much as the value of the slots? Branson may be an astute businessman but morals have little to play in multi million Pound businesses.
Still, as long as he can keep Necker island the way he wants it to be, who cares about lost jobs?

APL said...

Penseivat: "Branson may be an astute businessman but morals have little to play in multi million Pound businesses."

If he can buy good income generating assets at a discount, it makes good economic sense to do so.

Question is, what is the size of the airline industry after the coming shakeout?

Anonymous said...

Forgot to say, most of the Afghans/Pakistanis want to get to the UK.