ON THE SOAPBOX: Jim French - Chairman and Chief Executive Flybe

Jim French has been involved in the airline business for 40 years starting at Prestwick in 1970 with British Caledonian.  He spent ten years with Air UK before joining what was at that time Jersey European Airways in 1990, the airline becoming Flybe in 2002.  Flybe claims to be Europe’s largest regional carrier and operates a fleet of Embraer 195 jets and Bombardier Q400 turboprops.  Jim uniquely has been voted ‘Airline Executive of the Year’ twice (2002 and 2004) by Regional Airline World and received a CBE in the 2009 Queen's Birthday Honours List.

It seems only yesterday when Flybe was created and we announced that we were focusing fleet development on the Bombardier Q400 turboprop aircraft.  Many in the industry were shocked that we were going to replace 50-seat jets with turboprops at a time when others were doing the exact opposite.

Indeed, the situation for turboprop orders was so dire that Bombardier had announced that they were closing the Q400 production line for eight weeks.

Everyone thought we were mad!

However our belief was that the pressure from the 'low cost' airlines would continue and consequently yields would continue to fall and unless our costs fell, then we would be out of business.

We had reached a turning point in the history of our airline since as Jersey European (and British European for a short period), we were facing extinction and indeed, without the support of our shareholders at the time, we would not be here today.  A major element of our survival plan was to be absolutely focused on our key goals and one of these was the selection of the future aircraft fleet.

Whilst some say Flybe saved the Q400 since we gave the aircraft a massive vote of confidence by ordering 16 new aircraft, however it is equally true to say that the Q400 helped save Flybe. 

The aircraft had the unique combination of 78-seat capacity, sufficient speed and range to operate across our existing network and the routes we had aspirations to develop.  The Q400 economics delivered the lowest flight costs in our market.  In financial terms the expenditure was similar to a 50-seat jet on a one hour sector, yet had 28 additional seats and was therefore a very effective competitive tool against these aircraft. 

Its low costs would enable us to operate much higher frequencies than 150-seat jets for the similar total outlay and therefore we could use frequency to take market share against bigger jets – again on a one hour flight.  These factors would enable us to develop new routes at the lowest expenditure and the aircraft’s speed combined with its cabin noise-cancelling technology were major considerations to enable  us to stretch the envelope of sector length for customer acceptability. 

So successful has this been that we now operate the largest Q400 fleet in the world, by some margin, with 58 aircraft.

More and more airlines are once again turning to turboprops as they search for acceptable economics.

The 50-seat jet balloon has burst as airlines around the globe struggle to make money. This was possibly the shortest product life cycle of any commercial aircraft.  However this now leaves a fundamental unanswered question.

What’s next?

As an airline, we are always looking to the future – the long term future when it comes to aircraft planning.

Bombardier themselves have forecast 6,000 units up to 100 seats market over the next 20 years.

We ourselves will soon be considering the replacement for our original Q400s and we are hopeful that our airline will continue to expand once the economic situation improves.  Therefore we have started looking around the market to see what the airframe and engine manufacturers are planning for the next generation of turboprop aircraft. 

Where are the radical plans for engineering revolution which will deliver substantial fuel savings; weight savings; increased range and speed, customer appeal and space for reasonable amounts of hand baggage?  Where is the new high speed, fuel efficient and very green 100-seat turbo prop?

Or even 80-seat turboprop, or 60, or 40? 

The answer is – we haven’t found one!  We cannot find any manufacturers who are planning something very radical!

So what does the future hold for turboprops?  Is the simple fact that the potential gains outweigh the costs of development?  Will simple design and manufacturing costs consign the next generation to be simple stretches or “upgrades” of the current aircraft.

Over the last two decades we have seen British Aerospace, Fokker, Dornier and CASA all disappear from regional aircraft and turboprop manufacture.  We have seen the demise of the 50-seat jet economics.

Who will fill the potential void in regional aviation and with what?

Ironic isn’t it that whilst the military around the world still stretch the boundaries of manned and unmanned military development they have still acknowledged the need for a turboprop aircraft?  Brand new at Farnborough is the Airbus A400M with four propeller turbines.  A 250-seat ‘low cost’ passenger version is clearly not on but the technology is around for something smaller. 

The airline industry needs an aircraft for the long term development of regional aviation.

Jim French
July 2010

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Airline cuts UK flights

RYANAIR is to reduce its UK winter capacity from November, Chief Executive Michael O’Leary blaming the government’s Air Passenger Duty (APD) £11 tax as the cause.  Stansted suffers the most with the Irish airline reducing its base fleet from 24 to 22 which according to the Irish airline is 17% but on our calculations is just 8%.  Ryanair also says that “up to 1.5m” passengers will be lost during the period (about four months) which is impossible.  National and regional newspapers usually accept these headline figures without checking.  Ryanair says it will switch these London-based aircraft to other European bases where governments have scrapped tourist taxes and reduced passenger charges.  It has cut winter flights at most of its other UK bases, except Edinburgh and Leeds Bradford. www.ryanair.com

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Bethnal Green Town Hall becomes a hotel

LONDON has a new and impressive hotel and apartment accommodation in an unfamiliar area for most visitors, Bethnal Green Town Hall.  For those whose geography is not so strong Bethnal Green is in the heart of the East End, an area now revitalised with its nearness to ‘The City’ and the Stratford Olympic Park.  The hotel is on the Central Line, the first Underground stop after Liverpool Street.  The imposing and traditional 1930s building with Edwardian frontage and Neo-Classical fine stone frontage has been restored offering 98 spacious hotel rooms and apartments combining the amenities and luxuries of a 5-star hotel.  Enormous craftsmanship has gone into a sensitive restoration of wide marble halls, dramatic staircases and stunning public rooms which include a traditional council chamber and the original council meeting rooms.  Offering a mix of studios, one-bedroom suites, two-bedroom suites and feature rooms, every apartment is unique. www.townhallhotel.com

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Escape lounge opens in Manchester

MANCHESTER AIRPORT has opened its new ‘Escape’ lounge in Terminal 1.  Over 100,000 passengers are expected to use the facility every year.  Continental breakfast is offered and snacks are available all day.  The £1.7m investment has separate areas for relaxation and business, including a self-contained meeting or private function room.  There are freshly made dishes from an on-site chef, a wide range of alcoholic and soft-drinks and for kids (of all ages!!) wii, PS3 and a giant Escape Scalectrix racetrack (something that was tried by Virgin Atlantic when it opened its first Upper Class lounge at Heathrow –Richard must have got bored with it!).  Free wi-fi is also provided.  The airport already has an ‘Escape’ offering in Terminal 2 and expects to launch a third in Terminal 3 in the near future. www.manchesterairport.co.uk

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London could have Thames cable car in time for the Olympics

MAYOR OF LONDON Boris Johnson revealed yesterday (Sunday 4 July) plans for a spectacular cable car crossing of the Thames between the Greenwich Peninsula and Royal Docks.  The proposals being developed by Transport for London (TfL) would provide a privately funded fully accessible link for pedestrians and cyclists which would cut travel times between the O2 concert arena and ExCeL exhibition and conference centre to around five minutes.  The cable car would cross the river at a height of over 50 metres providing spectacular aerial views with a crossing every 30 seconds carrying up to 2,500 passengers per hour in each direction.  www.tfl.gov.uk

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Passenger figures improve

IATA now expects its member airlines to post a global profit of US$2.5bn in 2010, a major improvement compared with the Geneva-based organisation’s previous forecast released in March of a US$2.8bn loss.  Outgoing Director General and CEO Giovanni Bisignani said:  “We thought that it would take at least three years to recover the US$81bn (14.3%) drop in revenues in 2009.  But the US$62bn top line improvement this year puts us about 75% on the way to pre-crisis levels,” he said.  “The US$2.5bn profit comes with some important health warnings.  First, this represents a net margin of just 0.5%, which is a long way from sustainable profitability.  Second, a major part of the global industry is still posting big losses.  A stagnating economy, strikes, natural disasters, and a currency crisis have left European carriers as the only region really struggling with an anticipated US$2.8bn loss.  He highlighted Asia-Pacific carriers continuing to benefit from strong regional growth and that North American carriers are expected to return a profit of US$1.9bn. www.iata.org

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South America for Qatar Airways

QATAR AIRWAYS has launched scheduled daily flights to Brazil and Argentina from Doha for the first time.  The service to Sao Paulo, and onwards to Buenos Aires, is flown by a Boeing 777-200LR in a two-class configuration, 42 up front and 216 passengers in Economy.  Sao Paulo is Brazil’s largest city and Buenos Aires the Argentinean capital.  The two new routes complete a five-month expansion programme so far this year which has seen the airline introduce flights to Ankara, Barcelona, Bengaluru (Bangalore), Copenhagen and Tokyo.  During a four-month period starting in October 2010, Qatar Airways will expand its international route network further with six new destinations, operating scheduled flights from Doha to Brussels, Bucharest, Budapest, Hanoi, Nice and Phuket. www.qatarairways.com

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ON TOUR: Air Asia X

Air Asia X is probably the world’s first long haul ‘low cost’ airline.  In a practical sense it is a development of the charter airlines that for many years have been operating budget flights across the North Atlantic, and in more recent times offering add-ons at a price, typically uprated seating and more ambitious menus.

‘Low cost’ long haul scheduled airlines, at least out of the UK, started with a premium product, and were all financial disasters.  Eos, MaxJet and Sliverjet, with L’Avion in Paris rescued by British Airways.  They were also stand alone. 

Whilst in some respects ‘X’ likes to distance itself from Air Asia, it is clearly not stand alone.  On the London to Kuala Lumper (KL) service 80% of passengers transfer, mainly to Air Asia flights.  They are all ‘self-connecting’ with the exception of the Air Asia X A330 service to Perth (Australia) where through baggage can be checked in.  Melbourne is expected to follow.  The marketing push for Air Asia in South East Asia helps to promote the ‘X’ services at no cost to the sister airline.  Likewise from Europe.  The airlines feed each other. 

Airline spin-off

Air Asia X was born in November 2007, essentially as a spin-off from its namesake, a successful regional low cost airline that made its first flight in November 1996.  Air Asia is now a listed company on the Kuala Lumpur stock exchange.  Air Asia X is 48%-owned by Aero Ventures (a venture of Tony Fernandes and other prominent Malaysians and Air Canada's Robert Milton), followed by 16% Virgin Group and 16% by AirAsia the listed company.  Bahrain-based Manara Consortium and Japan-based Orix Corp have taken 20%.

What has surprised the carrier’s executives is the amount of transfer traffic at Stansted, said to be around 20%.  Passengers have to collect their luggage and then come landside before checking in.  Whilst business can be expected from Ireland and Scotland, regular travellers experienced with connecting through Stansted, Northern Europe, Dutch and even German customers are finding the prices more attractive than other gateways and carriers.  Whether this will continue, with the British government’s drive to squeeze every penny out of the airline industry remains to be seen.

Tim Claydon, Air Asia’s Commercial Consultant, is adamant that the package that the airline essentially offers in its Premium Class is space: “You are buying a top quality flat bed and the surrounding area.  Nothing more.  That is why our fares can be one-third of competitors.  Everything else is an extra.”

Long range Airbus A340

The airline has now completed the refurbishment of its pair of former Air Canada Airbus A340s, at a cost of £2m each and in a novel way.  In the centre of the aircraft are 18 Premier Class full flat seats laid out 2+2+2 with universal power points and privacy screen.  Branded blankets and pillows are provided, but they are not giveaways although you can purchase them.  The cabin has a very nice ambience about it with a mix of red and grey.

There is something of a culture shock for passengers used to the Business Class offering of IATA scheduled carriers.  You do get a special check-in desk but no Fast Track pass nor lounge pass , although the excellent Servisair offering is close to the gate.  Most clients have access but in any event you can pay for services provided.  No free alcoholic drinks.  The meals are the same as Economy (and first rate judging by the quality served at Stansted at a press reception).  The two servings, westbound the flights can be up to 14 hours, are part of the package.  There is a choice of three main courses Asian, international and vegetarian plus a good selection of snacks.  You can buy wine and beer very competitively, but that’s it, or a bottle of expensive whisky.  If you are that way inclined it’s best to purchase at the Stansted duty free.  With the exception of bottled liquor everything on board is priced very keenly in Malaysian Riggitts (MYR).

Passengers in the rest of the aircraft pay for soft drinks as well, and everyone is charged for the E-player laptop screen that not only offers a selection of movies and TV, but audio as well.  In order to keep the price down the luggage limit is 15kg for everyone. Or you can buy in advance on the web at a discount.

Turn left for Economy

It is considered smart to tell one’s friends that you turn left when getting on an aircraft (ie into the premium cabin).  With Air Asia X if you turn left you step into a very nice Economy cabin of eight rows, nine abreast.  It really does look fine and if the airline decides to charge extra ‘up front’ who can blame them.  The seats themselves are to a new lightweight design, do recline and give the feeling of even more than the 32” seat pitch that is offered. 

Air Asia X has one big advantage.  British Airways does not currently fly between London and Kuala Lumpur and therefore Malaysian Airways has the field to itself.  A quick check showed that Air Asia X was cheaper in Economy and about half the price in Business Class.  But it does depend when you want to fly and how far ahead you are booking.  There is of course competition from the Gulf-based airlines.

At the other end passengers use the KL International Airport Low Cost Terminal which has received mixed reviews but does have a proper Premium Lounge, once again available for a fee.  However wi-fi comes with the compliments of the airport operator.  The bus fare into the city is just £2 by comparison with an astonishing £19.80 single (£28.70 return) on the Stansted Express train to London’s Liverpool Street (the Stansted Slow – it stops at two intermediate stations).  The railway web site does not show the off peak fares at all in what appears to be a ruse to overcharge visitors to the UK.  First Class the charge is £46 return purchased from a machine, clearly only used by MPs and others on expenses, and by railway staff.

Talk of an Air Asia X IPO seems a little premature.  According to Chief Executive Azran Osman Rani this will not happen until the end of next year.

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