The Collapse Of Flybe: What Went Wrong

It was Europe’s biggest regional airline and the biggest operator at many smaller UK airports. It had the largest fleet of Dash 8s in the world and provided the routes no other carrier would touch. For its nine million annual passengers, Flybe was a vital link and will be sorely missed. But now, it’s all over and the UK has to come to terms with the fact that many of its unique regional routes will likely not be replaced. What went wrong?

Flybe aircraft
What went wrong for Flybe? Photo: Flybe

Where did Flybe go wrong?

Flybe started life in 1979 as Jersey European Airways. Throughout the 80s and 90s, the airline grew and prospered on the back of low fuel prices and increased travel demand. It rebranded as Flybe in 2002, continuing a steady rate of growth even through the global financial crisis.

The problems began in 2010 when Flybe was floated on the stock exchange for the first time. At the time of flotation, the share price was decent, earning the company £60m, half of which went into expanding its fleet. Ever since they’ve been in freefall for a number of reasons.

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Flybe
Flybe hasn’t had many profitable years in the past decade. Photo: Getty

Since 2010, apart from three years, Flybe has made a loss every year. The biggest loss was in 2017, when the company reported earnings before interest, taxes, depreciation and amortization (EBITDA) of minus £48.5m (-$62.71m). But why? What went so wrong for the regional airline?

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The Embraer order

In the summer of 2010, Flybe ordered $1.3bn worth of Embraer aircraft, amounting to 35 ERJ 175s. The order came with options for a further 105 of the type, signaling massive growth plans and a move from turboprops to jets.

However, the move was a bad one by Flybe. The Embraers turned out to not be as efficient on regional routes as the Q400s, and were an expensive commitment for the airline. By 2014, only 11 had been delivered, at which time Flybe announced it would cancel most of the remaining order, removing 20 of the type from Embraer’s books.

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Flybe Embraer E175
Flybe’s Embraer experiment was an expensive mistake. Photo: Flybe.

Instead, Flybe took 24 second-hand Q400s from US operator Republic Airways, which were not only cheaper to buy and operate, but also slotted neatly into the existing fleet. It had also leased some E195s, but by 2018 announced it would be returning all of these, as the Q400 was a better fit for its needs. The last E195 left the fleet on the 24th of February this year.

The remaining four E175 should have been delivered last year, but Flybe never took delivery. What happens to these remains to be seen. Overall, the foray into Brazilian jets was a very costly mistake for the company.

The price war with Loganair

After 24 years of operating under franchise agreements, Loganair broke free of its shackles in autumn 2017 and began operating as a carrier in its own right. But the airline was concerned, and rightly so, that Flybe wouldn’t let it just walk away.

Flybe went up against Loganair on a number of its key Scottish routes. It teamed up with Eastern Airways, offering flights between Shetland, Aberdeen, Edinburgh and Glasgow, all crucial routes for Loganair. Loganair chief Jonathan Hinkles warned that this strong competition could end up costing both firms millions, commenting to the Shetland Times that Flybe had “walked into a room with a hand grenade”.

Loganair Embraer
Competing with Loganair cost both companies dearly. Photo: Loganair

He wasn’t wrong. In 2018, Loganair posted a loss of £8.93m, £6.8m of which was thought to be down to the price war with Flybe. Flybe’s losses were greater, coming in at £9.4m in the same year, even though it dropped a lot of its Scottish routes in the end once it realized it couldn’t compete.

Although the two airlines kissed and made up in late 2019, announcing a new codeshare partnership, the damage had been done.

Industry pressures

Flybe was in a poor position when the referendum sealed the fate of the UK in 2016. It paid its bills in dollars, but made its money in sterling. As such, the devaluation of the pound after the Brexit vote meant the airline was hit hard.

At around the same time, the cost of jet fuel was rapidly creeping up. Flybe survived, but only just, and inevitably added massively to its debt burden as a result. Air Passenger Duty (APD) has long been a bugbear for the airline, as it has to pay it on both ends of many of the routes.

This base cost of £26 made its flights uncompetitive, and although the government is set to debate reforms to the APD in time for next week’s budget, it’s too little too late for Flybe.

Flybe
APD reforms, if they happen, will come too late for the purple airline. Photo: Getty

Added to all this, Flybe found itself monopolizing only the thinnest routes around. Any routes which were profitable soon attracted the attention of bigger airlines, who moved in with larger aircraft and mopped up the passengers. easyJet, for example, has taken over just about all the connections from Bristol to Scotland since Flybe built up the market there.

Was it coronavirus?

Numerous outlets are reporting that coronavirus was the ultimate cause of the airline’s failure. In fact, even Virgin Atlantic, joint owner of Flybe, laid the blame for the airline’s failure on COVID-19. In a statement sent to Simple Flying, it said,

“Sadly, despite the efforts of all involved to turn the airline around, not least the people of Flybe, the impact of COVID-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.”

Flybe, Urgent Talks, UK Government
The coronavirus may have broken Flybe, but its problems ran far deeper. Photo: Getty Images

While coronavirus certainly played its part in the collapse of this much-loved airline, it really was the proverbial straw that broke the camel’s back. Flybe’s problems were much more deeply rooted and historical than the virus outbreak, although undoubtedly the downturn in bookings certainly didn’t help.

Flybe becomes the third major UK airline to collapse in as many years, joining Monarch Airlines and Thomas Cook in exiting the aviation scene. Whether its 80+ unique routes will be replaced by another regional carrier is unknown, but the general consensus is that most will not.

Will you miss Flybe? Let us know in the comments.

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Jake Stentiford

I really miss Flybe, I’m based at EXT which means now there are one to two flights a day! It was already quite quiet #ripflybe

Alex

Really sad to see flybe go. Great little airline offering useful, value for money connections from smaller airports which other carriers do not provide.

What’s most interesting is what could happen next:
-Flybe have a handful of slots at LHR, CDG and AMS which could be sold or relocated to Virgin, Delta or Air France-KLM who jointly owned Virgin and in turn part-own flybe.
-Stobart Air have ceased operating flybe routes but continue to operate for Aer Lingus. IAG takeover perhaps?
-Franchise partners Eastern Airways and Blue Islands will become independent and have to resort to their own booking systems and sales channels.
-PSO routes like London to Newquay could see another operator step-in at short notice.
-Other flybe assets such as aircraft and routes could be taken over by another company (Loganair perhaps?).
-Likely growth of other carriers in the UK regional market (E.g. BA Cityflyer serving LCY to BHD, Loganair serving INV and ABZ to MAN and BHX or Aurigny serving GCI to BHX and EXT).
-UK Government could still potentially set-up their own airline (e.g. something like “British Regional”) as part of maintaining travel infrastructure severely disrupted by the loss of flybe (although very unlikely).

Either way the loss of flybe is going to be quite significant (unlike Monarch or Thomas Cook where Jet2 and TUI could swoop in and cover the losses) so I suspect we’ll see lots of changes in UK regional flying within the next few months. Most concern goes to secondary airports, where the significant downturn in traffic may force them to lay-off ground handling and terminal staff in addition to flybe’s own staff, particularly where flybe operated a majority of flights.

Gab

Yes, I would miss Flybe very much. It’s the hub airline at Southampton airport and helps me shuttle between work and family across the Irish Sea at the weekends. Oh, what am I going to do now? Adieu flybe RIP

Seán McErlean

As a previous custoner yes for sure.Those Q400 aircraft are superb.However the move to more expensive jets as outlined here definitely cost them dearly as well as the slots out of London Heathrow.

Michael Martin

Terribly disappointed with today’s news as a first and last passenger with Flybe. Consider myself lucky that I completed my return flight from Manchester to Southampton last Monday. Could not fault the service in any way from booking to check-in. Staff very courteous and helpful too. Now the only alternative public transport is rail or coach, neither of which has any appeal whatsoever. So now I will be polluting the Motorways with diesel fumes instead (that will please the Green lunatics) Grrrr.

Martin

Joanna! Great article – which is a breath of fresh air from this outlet.

Quick question, why are you referring to EBITDA in this context? Net profit would be a much truer indicator

Christian

The COVID-19 outbreak wasn’t the main reason why Flybe failed. It was in danger of collapse last year. I just saw where Loganair will take over some of the Flybe routes. I’m also assuming they’ll take some of the aircraft that Flybe had.

Ralph Anker

Hi Jo. You say easyJet took over Flybe’s Bristol to Scotland routes. Did you mean Birmingham to Scotland, as I don’t think Flybe ever flew between Bristol and Scotland? Indeed, easyJet will be starting Birmingham to Glasgow and Edinburgh service from the end of this month.

Nancy Pelosi's Bartender

The mere mention of the virus is a BS excuse. Companies who under perform will always latch on to something.

Toby

What will happen to flybes valuable Heathrow slots🤔🤔

Laura

These discount airlines do enormous environmental damage. Fares are so cheap because the cost to the environment is not factored in. Wasteful, selfish human beings who zip around with unnecessary frequency may mourn the demise of Flybe but Mother Nature is breathing a sigh of relief.

rob bond

What will happen to the fleet of Dash aircraft?

Oli

You mentioned 3 British airlines going bust, but you missed out fly BMI. Another big loss for regional UK flights…