Flybe is in difficult times: its CFO has just resigned; the airline is in transition; and the pound has fallen sharply against the dollar. But, as mentioned three years ago, I believe that the future of Flybe depends on bold fleet management, which is already in progress. Stage one, saw Embraer assist Flybe in cancelling orders and leasing turboprop aircraft. Indeed, Embraer arranged a swap of FlyBe’s E175 positions with Republic in the US in 2014. A renewed focus on rationalizing the fleet to concentrate on core profit routes will be key to the survival of the largest regional airline in Europe. This week on stage at the Dublin Aviation Summit, the brilliant senior fleet planning executive of Flybe, Sylvain Gloux, confirmed that the fleet will be reduced by at least ten aircraft over the coming two to five years. FlyBe will maintain some jet aircraft in their fleet: For the next two years, the airline’s fleet will be reduced to 50 turboprops and 10-15 Embraer 175s, which means the airline is keeping its four outstanding E175 orders.
Investors should take this news as most welcome since Flybe will be taking the required action to contract its fleet to ride out tough market conditions as Brexit takes effect. We all want to see the Flybe brand strengthen.
Meanwhile, the situation at Spirit Airlines in the USA is far more worrying. The airline has been forced to cancel over 300 flights since the beginning of May, often with no notice to passengers. That is close to 10% of all flights, which is being caused by pilots who are on a “go slow” policy as they seek to force better working conditions. At the beginning of the week (May 14), Spirit had to cancel 18% of its schedule (89 flights) and another 65 flights on Monday May 15. But the situation is predicted to worsen – there are no planned negotiations and it seems as the pilot union has denied all responsibility and says the pilots are doing their best to get the airline back on track. The union has also alleged that Spirit Airlines is understaffed and that a shortage of pilots is the real cause of the recent problems. On Monday, Spirit Airlines filed a lawsuit against its pilot union, seeking a court order forcing its pilots to return to the “status quo.” Spirit’s court filings include several posts from an online pilot forum in which Spirit pilots proposed intimidation tactics against fellow pilots who volunteered to pick up open flights. On Tuesday, a federal court issued a strongly worded temporary restraining order requiring the union to make sure its members do not engage in any concerted slowdown or other labor action pending a hearing next Monday.
Expect there to be a bit of a fight on this one and expect Spirit pilots to take aim at the Allegiant pay deal of $216 per hour as their benchmark – that will put a significant hole in Spirit margins and that is indeed a worry for investors.
And finally, the proposed US laptop ban extension to the European Union is a significant worry for all airlines. The Middle East majors have seen a big hit on business travel due to the laptop ban – the extension will take the pressure off-of them for sure and will force business travellers to carry USB sticks and hard drives as standard. So, maybe we should all look to invest in US airport arrival laptop hire facilities with drop-offs in departure lounges? Now that seems like a good investment to me.Date: May 18, 2017