- 13 Mar 2020
- Reading time
- 2 minutes
Flybe, which used to be the most extensive regional airline in the UK, has finally gone into administration, blaming their condition on the coronavirus outbreak. Several complaints and opinions about Flybe before this development require that one examines what issues are facing this firm. Is coronavirus the problem, or are there some longterm issues that this firm has been managing? We know from the records that Flybe received a financial bailout to rescue it from collapsing a year ago. So, what went wrong? Here are some possible reasons.
Regional operational mode made Flybe vulnerable
Coronavirus aside, Flybe has been battling several problems at the local market for a while. This firm constitutes about 40% of the regional flights in the UK. As such, domestic issues such as sluggish consumer spending and the Brexit effect have contributed to the woes of Flybe. Coronavirus is just an addition to the list. Their situation got worse as a result of the weak British Pounds, which affects aircraft leasing costs and increases fuel price. Constant pressure from road and railway mode of transportation cannot be overlooked, as well.
Huge Payment of Tax than other airlines
Virtually all Flybe routes are domestic, thereby placing this airline at a disadvantage of paying tax very often. All airlines are expected to make payment for Air Passenger Duty, i.e., tax on each passenger on a particular flight taking off in the United Kingdom. For airlines operating within the country, they pay for both the departure and arrival of Air Passenger Duty. However, the Air Passenger Duty payment for international flights is paid only on international routes. Therefore, this levy is assumed to have been one of the reasons Flybe is closing down, as they spend over 100m Euros every year on it. The government considers helping Flybe by reducing the levy of APD on all domestic flights; however, this has not been implemented since the UK is wary of breaching EU rules.
Flybe operated in a very competitive market
Aviation requires a lot of highly expensive assets such as aircraft, and their costs fluctuate almost every time. Also, getting fuel is essential to drive those engines, and it constitutes about a third of the total airline costs. With all these, Flybe still had the agitations of aggressive unions, strict regulations, high bargaining power of buyers, and increased competition from low barriers entry to face. Flybe was just squeezed in between low-cost airlines such as EasyJet and Ryanair and many major airlines like British Airways. The UK market was just too competitive for Flybe.
Availability of too many planes
Flybe struggled for many years to expand. After they had the opportunity of developing, the airline ended up buying too many planes, which are limited to certain things, instead of purchasing fleet that will enable them to fly routes efficiently and succeeding managements fought with that burden. The owners simply want something different. Over the last ten years, Flybe had four chief executives, rebranded twice, and almost collapsed on three separate occasions. The firm has undergone restructuring. Just about a year ago, they were bought by Virgin for £2.2 million. They have had two airlines in which they had different business models. Stobart, one of the owners, prefers to fly regional routes, Virgin preferred Heathrow and Manchester. The owners simply have different opinions which reflect on the management of Flybe.