Is Flybe The Next European Airline To Collapse?

Over the past month we have seen European airlines Primera Air and Cobalt both cease operations. While I did predict Primera Air’s bizarre strategy and performance could lead to serious problems some time ago, I was really sad to hear about Cobalt.

I flew them from Larnaca to Brussels last year (one of their longest flights) when they were still a very new airline, and had a wonderful experience.

Cyprus is a fantastic country to visit and I was hoping the new airline would increase tourism to the country.

2018 is a tough time for European airlines, especially those low cost airlines that are trying to aggressively grow. Rising fuel prices, Brexit concerns, and massive competition make it difficult to survive.

Ben has recently written about how Air Belgium is on the brink of liquidation, and how ‘bad things happen in threes,’ referring to the fact that Air Belgium could be the third European airline in a month to cease operations.

While Air Belgium may indeed stop flying soon, Flybe may beat them to it.

Flybe

Flybe is considered to be ‘the largest independent regional airline in Europe,’ flying since 1979. They have a range of bases all over regional airports in the United Kingdom, and fly a fleet of 75 aircraft to 83 European destinations. They primarily fly Bombardier Q400 aircraft, so most of their routes are very short and they operate an all economy class layout.

They fly around eight million passengers each year across 210 routes in fifteen countries, though their focus is definitely regional UK.

I’ve flown with them before (they’re very handy for flying into London City, my favourite London airport), and had a great experience, though rattly, noisy propeller planes aren’t my favourite mode of transport.

They use Avios as their points currency, although they are not owned by IAG.

So why the sudden concern they will stop flying?

Flybe has just issued a ‘profit warning,’ advising the market that their losses will be even worse than expected. Companies issue ‘profit warnings’ to advise their shareholders that profits will be lower than they had anticipated — in Flybe’s case, they did not make a profit last financial year, and their warning is that their losses this year will be even greater.

Critically, this warning caused their share price to dive by 40% in one day last week, meaning the company is worth only about half what is was worth a week ago.

Flybe has blamed a range of factors on their worsening financial performance — the inability to continue charging for credit card payments, a ‘softening in the market,’ increased fuel prices and the weakening UK currency.

Flybe has struggled financially for some time, and The Guardian has singled out Flybe in an article about ‘which European airline could fold next’.

Flybe aircraft (Source: Irish Times)

What to do if you are booked on a Flybe flight

There’s no cause for concern right now, however we have seen with other airlines, things can happen very quickly when an airline is in financial distress.

I’m not an aviation financial analyst and don’t see any reason to panic, but the recent announcement from Primera Air especially took a lot of people by surprise. They were not a start up airline (despite their aggressive trans Atlantic ambitions) — they had been operating for around 15 years.

I would highly recommend having travel insurance for any upcoming Flybe trips, and ensuring your policy covers airline insolvency, as many policies specifically exclude this. I always recommend travel insurance regardless of the airline.

I’d be happy to fly with them through next year, with travel insurance in place.

Bottom line

2018 has been a rough year for European airlines already, and it’s sad to see these airlines cease operations. Ryanair boss Michael O’Leary has said the upcoming Northern winter will be even tougher for European airlines, given the reduced leisure travel, though his statements should be taken with a grain of salt.

I am not saying anything will happen to Flybe (I certainly hope they survive as they’re a great little airline), but a profit warning followed by such a severe share price fall could be the writing on the wall, so make sure you have your travel insurance in place.

Have you flown Flybe?

Comments

  1. Not to forget: Skywork (regional airline based in Bern, Switzerland), Small Planet Germany, Poland and soon Lithuania – all about to cease operations or have already ceased.

  2. While not due to financial difficulties, be prepared to say goodbye to Brussels Airlines in 2020 as it merges with Eurowings.

  3. The question is: How much do blog posts like this and rumors contribute to the downfall of such airlines? If you spread these kind of rumors you have a negative impact on the future bookings and this can become a self-fulfilling prophecy for the airline.

  4. Idiotic even by James’ low standards. Poorly informed scaremongering. Stick to the luxury cabin reviews, please.

  5. “rattly, noisy propeller planes aren’t my favourite mode of transport“

    Except that’s not really a good description of a Q400, is it?

    The “Q” stands for “quiet”.

  6. Given that BA does not many or any domestic UK routes that are not in or out of London, I would imagine that Flybe’s route structure would be quite attractive. And their base at the under-used Exeter airport would be worth something too.

  7. I’ve travelled on Flybe a few times in the UK, mainl between London and Newquay. Perfectly OK, except for some over zealous baggage regulation enforcement and mainly junk food catering.

    Flight review here: https://www.2paxfly.com/2016/04/04/fly-me-to-the-moon-or-flybe-to-newquay-but-not-many-stars-to-play-with/

    I think your article is a little ‘Henny Penny’. A profit warning, is usually a regulatory requirement. It requires investigative/business journalism skills (which are really outside the metier of this blog) to draw the inference of potential insolvency that you do, but provide little evidence for.

  8. I am confused by this story which seems incomplete. I thought some Flybe routes are flown by Stobart Air as franchisee using Flybe codes. Are you suggesting that those might be at risk too or only those routes which use Flybe aircraft (and, if so, which routes are which)?

    Also, why are you suggesting a possible collapse rather than a CVA? For an airline with some strong routes, wouldn’t a CVA be more likely if things did deteriorate? Several US airlines have been through Chapter 11 which is similar.

    I am *not* suggesting that Flybe is close to collapse, merely highlighting that I think James’ post is superficial to the point of being potentially materiallly misleading. It would benefit from substantial expansion.

  9. This article should be removed. Highly irresponsible and dangerous. Suggesting people should if they can move to another airline. That just spreads panic and makes matter worse. Get all the facts correct before you write these type of articles

  10. Honestly posting this article is irresponsible. I agree with the description “idiotic even by James’ low standards”.

    Why not simply write that they issued a profit warning instead of making a claim about dissolution?

  11. I’ve flown Flybe a few times. They are fine except for the food which sits well in the ‘junk food’ category. Here is my review of a flight between London and Cornwall: https://www.2paxfly.com/2016/04/04/fly-me-to-the-moon-or-flybe-to-newquay-but-not-many-stars-to-play-with/

    I think your story is a little ‘Henny Penny’. Reporting a profit warning is often a statutory obligation. It’s the nature of the loss and the planning around it that would enable an assessment about potential insolvency.

    I think financial analysis is outside the metier of this blog, and should be avoided, unless business investigative journalism skills are going to be applied.

  12. @The nice Paul: the “Q” may stand for “quiet”, but are Q400s really quiet? Not so much. Let’s be honest, they’re quieter than, say, an old Brazilia (I loved those things, but that’s just me), but not nearly as quiet or comfortable as an E-jet.

    @Max Muilero – that’s a good point, but on the other hand what is a reporter supposed to do? Not tell his audience there’s a potential problem for readers? It’s a hard call. I think recommending booking away may still be premature, and if the idea catches on could become a “self-fulling prophecy”, but the suggestion to buy flight insurance that covers insolvency for flights in the future is reasonable.

    @Bour – CVAs differ significantly from Chapter 11 in the US. The biggest problem seems to be HMRC’s attitude and that some creditors can still demand full payment before supplying new product. Here’s a good summary with discussion of UK law moving closer to US law:

    https://www.begbies-traynorgroup.com/news/cva/comments-on-uk-version-of-chapter-11

  13. Can FlyBE sue OMAAT for defamation?

    Ben, you need to choose your contributor carefully. Posting this article is irresponsible. I agree with the description “idiotic even by James’ low standards”.

  14. @James generally enjoy your articles but as other posters have said, this is way outside your area of speciality to make these wild claims. Please stick to airline reviews and route news etc, and leave this type of speculation to expert financial commentators.

  15. All in all, five European airlines went down in the past two months. There’s really no need to stir up more panic by FUD articles.

  16. @ivan .. ‘expert financial commentators’? can you name one? these incredibly talented people that can see the future?

    i agree this post is speculation at best (calling ‘airline collapse warning’ on a profit warning is pretty leftfield) .. but it’s no more leftfield than the number of other journalists trying to claim the same thing, or analysts.

  17. FlyBe in the UK is often known as Fly MayBe and that’s down to the sheer number of short notice cancellations they used to have before the provisions of EU261 kicked in. Cancelling two out of three services on some routes a day was not unusual and even then the one operating flight was far from full. Now they have to do the sums and see whether they pay compensation for cancellation and delays or operate less than full aircraft.

    The Dash 8 is a dog on routes over 30 minutes, it’s uncomfortable anyway and I agree, noisy. FlyBe are getting rid of their larger Emb195s and going to replace with more Dash 8s so appeal of the routes operated there drops to zero as we are talking here of routes in excess of two hours.

    The main UK domestic routes not touching London are covered by easyJet anyway and they will no doubt pick up slack with a better offering if and when FlyBe go.

  18. I have traveled with Flybe a lot and many of the flights have been very busy.

    I think route pruning is likely but I am sure this airline, which has some of the friendliest cabin crew in my experience, will survive in some form. In my uninformed view a prepack administration is the worst that would happen.

    Much as I dislike the Q400 they do seem well suited to many of the routes they fly.

  19. @Vand Richard Quest at CNN is one journalist that springs to mind who takes a keen interest in the airline sector. Can’t imagine him making such claims without doing some proper research and analysis first. I doubt James even called the PR Department of Flybe for further comment on the profit warning before publishing this article.

    James should stick to articles which is the reason why we read this blog and where he can add value, airline and hotel reviews, airline route news and best uses and ways to accumulate points/miles for premium cabin and hotel redemptions.

  20. I don’t think it’s fair on the airline, its customers, staff and shareholders to put ‘pub talk’ on line like this. Publishing this type of article with such a clickbait headline means that it’s more likely to become a self fulfilling prophecy.

  21. This does seem a bit premature a profit warning is totally different that an airline being close to insolvency, and this article mentions nothing about their cash reserves or cashflow situation.

    As others have mentioned the ‘bones’ of their route structure are a lot more attractive than a half-baked low-cost expansion like Primera so I doubt they would ever go under that quickly without finding new investors.

  22. Let’s all give James a break, shall we? We don’t come to OMAAT for in-depth financial analysis. We come for great trip reviews and tips about how best to accumulate points and redeem them for premium cabin travel.

    For those interested in flybe’s financial health, let’s not be guided solely by share price. The 40% drop in the share price is disconcerting, but how much cash does the company have on hand? How much of its credit facilities are available? If I remember correctly, Primera ceased operations because it was unable to secure additional debt to fund operations.

  23. If ya’ll feel James’ article is contributing to FlyBe’s potential demise, then surely it proves they’re clearly in a fragile state? Would such an article have the same effect on Qatar for example? Madness.

  24. This article is highly inappropriate and blog posts like this can cause perfectly viable companies to fail and people lose their jobs.

    As a companies specialist, profit warnings are perfectly normal in the market. The reason for the 40% drop could be in part attributed the global drop in stocks over the past week, driven by trade sanctions/concern at the American mid terms/China/Saudi Arabia etc.

    This isn’t the first time James has written something idiotic. Maybe its time Lucky reviewed the quality of his contributors!

  25. I agree – highly idiotic and irresponsible words – better just stick to commenting on cabin crew clothing.

  26. It’s not irresponsible to have an opinion, this is a blog after all (OMAAT has never claimed to be CNN). Let’s stop trying to insist what people can or can’t write.

  27. When alarming advice is given under bold headlines on “What to do if you are booked on a Flybe flight” then that may have adverse implications for a company and it’s employees and so goes a little bit further than simply “having an opinion” and, I maintain, as many others have commented, that this is recklessly irresponsible.

  28. @Ben,

    The majority of commentators are right; it is irresponsible to suggest that an airline is about to fold, just because it issued a mandatory (as required by UK legislation) profits-warning. James was wrong to do so, and you are wrong to defend his partially Informed speculation.

  29. Agree with the many comments that this is at best irresponsible and, subjectively, idiotic.

    Brings to mind those who made similar claims about Qantas a few years back when it made losses, and its share price was hence down. And look where it – and its share price – is now…

  30. If Flybe goes I’ll be sad because until recently I lived close to London City Airport and I love seeing the incredibly unique purple livery which is so unappreciated. But if Flybe does bid a sad farewell I bet IAG will swoop in and acquire the remnants of Flybe and so we will probably see BA cityflyer expand.

  31. Flybe operate feeder flights from UK regional airports that connect to international airlines operating out of CDG, Schiphol and other important European hubs. They provide an all-economy service where basic service (food must be purchased) good seat-pitch, padding and comfort is assured. They are providing an excellent and well priced product to the community and should never have their operations be jeopardised by foolish words from an inexperienced, incompetent and irresponsible self-appointed “airline analysis expert”.

  32. Had a nice flight on Cobalt last year but nothing stood out.

    Skywork had different issues and Bern alone wasn’t going to be able to sustain this little airline.

    Flying is way too cheap in Europe and that is going to change in 2019. Meanwhile Ryanair still has €9.99 flights from Eastern Europe to Aqaba, Jordan

  33. @ Ben

    Unfortunately, you are wrong.

    This is not an opinion piece nor billed as such.

    It provides direct advice to readers that it would be prudent to change to another carrier if financially feasible.

    The problem is that:

    1) The article focuses on share price (useful if you’re an investor), not business financial fundamentals (such as cash flow), as a warning to “collapse”, exposing the writer’s ignorance on matters of business viability

    2) The writer hasn’t bothered to do any actual research and then report in an unbiased fashion on those financial fundamentals (in any case the current actual data aside from a profit warning aren’t available until 14 Number 2018 when the half year results are made public).

    3) Therefore the advice is unsubstantiated

    For example a few minutes of Internet investigation produces:

    From Ian Milne, CFO 18 June 2018 (annual report):

    “…The directors have assessed Flybe’s viability over a three- year period to March 2021. While the Board believes that the Company will be viable over a longer period, three years is the period considered most appropriate to form a reasonable expectation of the Company’s viability. This period is supported by the three-year business plan enabling the forecasting assumptions to be aligned….

    …Flybe had free cash balances of £86.7m at 31st March 2018…

    …Having considered the forecasts, the downside case and potential mitigating actions along with making other enquiries, the directors have a reasonable expectation that Flybe has adequate resources to continue in operational existence for the foreseeable future…”

    Subsequently…profit warning issued 17 October 2018 (prediction of pre-tax GBP22 million annual loss, which led to the share decline) in anticipation of the announcement of half year results on 14 November 2018.

    @ James is acting unprofessionally and irresponsibly. Again.

  34. @James I’m adding my voice to those who say this article is both misinformed and irresponsible.

    If you wanted to run an article on backup plans when flying with an airline in difficulty you could have properly researched those that failed in the last couple of months and then used them as examples.

    This kind of article makes you look very silly, in case you didn’t notice.

  35. @Platy well said. @James, I feel this is part of a pattern of poorly researched (or perhaps not researched at all) articles. @Lucky , would you intervene?!

  36. @ James

    Imitation is the sincerest form of flattery, as the saying goes…

    There is a remarkable similitude between the content and structure of this article and the one on the “Simple Flying” website of virtually the same title.

    Coincidence or flattery (whilst noting that your IMAAT article appears to have been published first).

    I noticed another such case of “flattery” between IMAAT and AusBT on the issue of the Thai Airways schedule changes on their Australian services.

    Let’s go with the Oscar Wilde version of the saying in anticipation of a simple explanation and a wink of humour:

    “Imitation is the sincerest form of flattery that mediocrity can pay to greatness”.

  37. @ James

    FWIW I’d LOVE to read about your tips and insights derived from your extensive travels (currently Morocco?) wherein you can write with authority from your own personal experience!

    Inspire the reader to make that trip and point the way forwards!

  38. @ Platy — my ‘Impressions of Morocco’ post has already been written, and should be published tomorrow : )

    Thanks for bringing that Simple Flying blog to my attention — I had never heard of it before now, and confirm that my post was written before theirs was. Other blogs don’t get the level of scrutiny that OMAAT does. The similarities were quite noticeable!

  39. I loved flying with them from Southampton airport. The staff open the departure room door and you walk max 50 meters to the plane. And from the train to actually being in the departure lounge is 10 minutes. That sure beats the struggle to get through the main London Airports. I’m sure they will be around a lot longer -even AT&T lost 8% of it’s share price yesterday after its worst performance in 16 years. And they will be around for ever

  40. Sorry James, but that’s a very amateurish report on so many levels. Not up to OMAAT standards.
    Stick to what you really know about, like…..erm…….

  41. @Platy: You seem to think that because the CFO produced a spreadsheet three months ago showing everything hunky-dory that the company could not be in trouble.
    That is not independent evidence and so should be given very little weight.

  42. @Platy
    Where does the article suggest changing carrier?
    I read that it recommends having insurance in place, and checking that the terms of the insurance cover a type of event which has recently happened several times in the sector (so possibly changing insurer)
    That seems prudent.

  43. I wish more LCCs & ULCCs go bust. It’s so sad to see how they shuttle chavs on stag dos across Europe, ruining great cities like Prague, Budapest & Riga.

  44. Stobart Air are waiting in the background to pick up the pieces should they fail.
    I have used them many times and I lIke them…..not cheap but great for internal flights within the UK.

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