Flybe must adapt to survive in challenging market - should it return
Flybe will be entering an extremely uncertain market should it return next year, analysts have warned.
A possible return for the regional carrier was mooted earlier this week, with administrators at EY selling the remaining assets of the airline to a new owner.
However, the challenges to a successful relaunch remain enormous, warns Ralph Hollister, tourism analyst at GlobalData.
He said: “Flybe re-starting flights as early as next year will provide some much-needed optimism for the UK and its current economic situation.
“However, the airline needs to avoid a repeat of what occurred last March by learning from its mistakes.
“Flybe has carefully assessed the key reasons as to why it was forced into administration earlier this year.
“The previous incarnation of Flybe pursued a rapid growth strategy before it ran into serious problems.
“The continuation with such aggressive capacity growth in the face of other airlines falling by the wayside was high-risk and ended up being a significant contributing factor towards its failure.”
Flybe entered administration in March when years of financial losses were compounded by the outbreak of the Covid-19 pandemic.
Hollister continued: “The ongoing issues that Flybe originally suffered with could be amplified for its relaunch due to Covid-19.
“It is still unclear what Flybe’s new operational strategy will look like, but it may be that Flybe will aim to increase its market share domestically.
“Flybe was reliant upon a number of different macro-economic factors in a single island nation to run smoothly in order to achieve operational success, instead of spreading its operations more evenly around Europe to decrease this risk.
“Sluggish consumer spending was a contributing factor to Flybe’s demise, and this may be even worse due to COVID-19 and the negative economic implications the pandemic has brought with it.”
According to Cirium data, Flybe was one of the largest operators of short haul routes within the UK and Europe before it collapsed, operating a total of 2,374 flights a week with 175,260 available seats from 43 different hubs.
The figures are based on the month of January this year, pre the coronavirus outbreak.
It was the third largest airline in the UK, measured by volume of flights after easyJet and British Airways, representing 11 per cent of all flights operated by UK carriers.
Hollister concludes: “It looks as though Flybe will once again be entering the same hyper-competitive market, which is now even more so due to Covid-19.
“Flybe’s price point caused it to be stuck in the middle ground between the UK flag carrier – British Airways, and low-cost carriers – Ryanair and easyJet.
“Since Flybe’s departure from the airline industry, the major players in the UK airline industry have not changed and these airlines still consume large parts of the UK market.
“However, opportunities are present - domestic travel is set to recover before international travel, which could bode well for Flybe if it is focusing on the UK market.
“Struggling UK airports may also be willing to offer slots for a cheaper fee than usual, especially as airlines such as easyJet have been pulling out of the kind of secondary locations that Flybe is likely to target, such as Newcastle and Southend.
“In order for Flybe’s relaunch to be successful, it is imperative that the airline grows gradually with demand.
“It needs to maintain a slow growth strategy in order to remain reactive to changes in key costs and increases in competition, which can occur quickly due to the turbulent nature of the industry.”