www.flybe.com

How to turn around an ailing airline when you only have eight days of cash in the kitty

Flybe has just launched a new service between Dublin and London City Airport, going up against British Airways and CityJet as it seeks to grab a slice of the business

Published 30/10/2014 | 02:30

Saad Hammad is astounded at the state he found regional UK airline Flybe in when he took over as chief executive just over a year ago. "It was such a dysfunctional place," he says. "The level of dysfunction was huge. There was almost open warfare; people just weren't collaborating."

No wonder then that Flybe was close to a crash landing. The airline - Europe's largest regional carrier with nearly 100 aircraft at one stage - had been battered by the economic downturn, hit by airport passenger duty in the UK, and struggled to cope with high oil prices.

In the financial year to the end of March its losses spiralled to £41m (€52m) from £6m a year earlier. Profit warnings were the order of the day after an ill-timed stockmarket flotation in 2010.

Its shares, which debuted at £2.95 that December, were changing hands at 66p within less than a year. In the weeks before Hammad was appointed CEO in 2013, they were close to 40p.

Flybe's previous chief executive and chairman, Jim French (who had run the business for 12 years having joined its former incarnation as Jersey European Airways in 1990), had tried to stem the losses by initiating a cost-cutting programme that included axing nearly 600 jobs. Flybe also sold take-off and landing slots at Gatwick (effectively quitting its main London hub) and cancelled a multi-billion euro aircraft order with Brazilian maker Embraer.

That had helped to pilot the airline back on course to profitability (and Hammad is careful not to criticise French, who's credited with having grown Flybe into a significant regional force before it got into trouble), but it was still far from enough to ensure survival.

Hammad (52), a former chief commercial officer at EasyJet and ex non-executive director of Air Berlin, stepped in and took a butcher's knife to the rest of the business.

"We are shrinking to grow," he said as he announced further job losses and a reduction in both the number of aircraft and routes Flybe operated.

The airline's network includes routes to Dublin, Waterford and Knock from the UK. Last year, it carried 7.7 million passengers, up 6.9pc, as its turnaround plan gathered pace.

On Monday, it launched its new Dublin-London City Airport service, putting it in direct competition with a newly-launched service by British Airways, and the incumbent on the route, Dublin-based CityJet.

Flybe had become too complex, says Lebanon-born Hammad, who has been based in the UK since arriving there at the age of seven to go to boarding school. He studied at Oxford and the Sorbonne. He also previously worked with Procter & Gamble and Vision Express.

"It wasn't an integrated organisation," he says of Flybe. A list of the problems is enough to leave you breathless.

"There wasn't enough coherence, integration or teamwork. The costs were out of whack, you had surplus aircraft, the wrong aircraft, 40pc of routes didn't cover their fixed costs, and there was no commercial capability to speak of. We'd announce a new route before we'd even negotiated a rate with the airport."

Its pilots were flying less than half the number of hours as counterparts at EasyJet, underlining how underutilised its aircraft (and staff) were.

He shared the "financial facts of life" with staff and told them that they "had to work together".

"When you're running out of cash, that really helps to focus people's minds." At one stage in winter 2013, there was just eight days of cash left, he says.

Flybe was getting the rack rate of fees at airports, adds Hammad, who says the decision process about selecting new routes and destinations was more often than not based on "Voodoo" rather rigorous analysis.

"I went up to Edinburgh Airport not long ago and the director said I was the first ever senior person he'd seen from Flybe," he explains.

"People got carried away," he offers by way of explanation for what had gone on. "You have to stay disciplined. You have to stay humble. It's one of those sectors (aviation) that attracts larger than life people and historically it's been very glamorous and exciting. It still is very exciting but I can see why people lose sight of basic fundamentals."

He argues that short-sightedness isn't just peculiar to the aviation business.

"Entrepreneurial businesses can reach a level of complexity that sometimes outgrows the capability of the founding people."

Hammad left EasyJet after being headhunted to join private equity firm Gores Group in 2009, saying he was "pulled as much as pushed" in making his decision to leave the airline.

He was operating partner for Europe at Gores, handling restructuring projects. But almost five years later, he was back in the airline business.

"I was chatting to a friend of mine, who didn't have the brief, but he introduced me to Jim French and that's how it happened," he explains. "But when it came up I thought, oh my God, this is undercapitalised, has a balance sheet problem and a P&L problem, but I thought it was a powerful concept to connect regions."

"I did my research and I ended up - even though my wife says I've got a predilection for pain and punishment - taking it on. I've done a lot of this sort of stuff, I know what to do. It's like a higher purpose - you're part and parcel of the economic and social infrastructure of these communities. Half our passengers are business travellers. The beauty of Flybe is it's a do-good company."

Apart from doing a deal to cancel the aircraft orders, Hammad also said more staff would be made redundant (the eventual figure was fewer than anticipated). Earlier this year, £150m (€190m) was raised through an open share offer for what Hammad said was a "rebirth" of the carrier. About half was used to bolster its balance sheet, with the remainder earmarked for improved productivity.

A total of £47m of cost savings were pushed through last year, with another £24m due this year. "If you control you costs, you control your future. If you don't control your costs, you're always going to be a victim," says Hammad.

With the new route to London City Airport, Hammad is confident that Flybe can make a go of it despite the competition from British Airways (part of the IAG group) and CityJet. IAG chief executive Willie Walsh recently told the Irish Independent that he believed there's room for all three carriers on the route, but it's difficult to see all three making a comfortable living off what is a niche service.

Last year, London City Airport handled almost 3.4 million passengers and just 169,600 were flying from or to Dublin. That's about a tenth of the number that flew between Dublin and Heathrow, less than a fifth of the number that travelled between Dublin and Gatwick, and less than a quarter of the number that flew between Stansted and Dublin.

But Hammad is obviously enthused about his job of revitalising Flybe. What's more, he'll be paid well if he pulls it off.

He has negotiated a three-year deal that will see him earn a cash payout of the equivalent of between 3pc and 4pc of any increase in the company's market capitalisation, with no ceiling on what he can receive.

"It's about just rewards for the job at hand," says Hammad. "More importantly, it's a way of keeping score - the affirmation that we succeeded and delivered. If I don't deliver with my management team, I will not get rewarded."

Indo Business

Let the trend be your friend!

Get away for less with Flybe
This week saw Flybe launch operations from London City airport with six routes connecting the UK and Ireland to the capital's financial district.
One-way flights from London City to Exeter cost £34.99, Belfast £39.99 and Inverness, Edinburgh or Dublin £49.99.
The budget airline has also recently partnered with rewards scheme Avios. Avios. Flybe customers can now earn Avios points when booking flights.
Flybe will be phasing out its existing Rewards4All frequent-flyer programme. For more information visit flybe.com.
Got any deals or discounts to share with readers? Send details and deadlines to your money@independent.co.uk

1st November 2014

Airlines ordered to pay out if flights are delayed: Victory for passengers who can claim for past six years

Jet2 and Thomson lose appeals against passenger delay compensation
Two families were left stranded for total of 33 hours and took them to court
Airlines tried to overturn compensation rulings at Supreme Court but failed
Rulings mean thousands more who have made claims likely to be paid
Experts believe that millions of people may be able to sue tardy airlines

By VICTORIA BISCHOFF FOR THE DAILY MAIL
PUBLISHED: 12:40, 31 October 2014 | UPDATED: 10:39, 1 November 2014

A big seller as appeared Dumping stock at will.


The figures speak for themselves.

31/10/2014 Buy Volume 197,133 Sell Volume 802,968
30/10/2014 Buy Volume 132,794 Sell Volume 543,196
29/10/2014 Buy Volume 171,825 Sell Volume 620,667

Is there a site which gives "honest" figures for B and sells as a "multiple" of trade price.

Often thought is might be useful.

The ones I have looked at seemed riddled with "guesses"!

Don't really know but interested in a moving average of such!

I am too old to write a program.

Get away for less with Flybe
This week saw Flybe launch operations from London City airport with six routes connecting the UK and Ireland to the capital's financial district.
One-way flights from London City to Exeter cost £34.99, Belfast £39.99 and Inverness, Edinburgh or Dublin £49.99.
The budget airline has also recently partnered with rewards scheme Avios. Avios. Flybe customers can now earn Avios points when booking flights.
Flybe will be phasing out its existing Rewards4All frequent-flyer programme. For more information visit flybe.com.
Got any deals or discounts to share with readers? Send details and deadlines to your money@independent.co.uk

1st November 2014

Fred just look at the money am trade page at the end of the day.

There are some dont knows but the sell figures are that overwhelming that its bound to be correct.

Anyway just look at the individual delayed trades at the days end and you can see the big seller each day.

Even the advfn crowd acknowledge there is a big seller.

What we want to know is WHY is he selling before supposedly good results?????.

My bet is that its these 10 planes they have rotting on the ground, somehow the seller as got the nod probably that other airlines are not in demand for them now that ebola is likely to subdue demand overal for air flight.

Costs them about £7 million per quarter as well just to have them parked up and they arent budgetting for this in the acounts until NEXT YEAR.

Dart (DTG), down 5.7% to 246.13p, will make a provision of £17m in its current financial year to cover potential claims against its wholly-owned subsidiary Jet2.com.


Wonder when FLYB will be announcing there provision.

Well done db, still cruising higher. Shorts must be getting singed :0)

Thanks Chris -------- oh I do hope soooooooo! :-)

gf are you short of DTG aswel as these?.
which in your opinion is the better trade to take.

Good God, are you asking his advice?!

sinutab - The question you should ask gf is ARE YOU DERAMPING DTG as well. :0)

Sinu without doubt FLYB. Heavy.

Sinu, just ignore them 2 above, like Cynic says both fools.

Another poor wee soul about to lose a few bucks. OMG :-)

Not overbought imo, still some mileage left in RSI (bottom indicator)

Signal Update

Our system’s recommendation today is to STAY LONG. The previous BUY signal was issued on 28/10/2014, 6 days ago, when the stock price was 113.5100. Since then FLYB.L has risen by +9.68%.

Market Outlook

The bulls are in full control. The negative sentiment that led to the last bearish pattern has evaporated. Besides, the signal is suggesting to STAY LONG. It is best to follow the signal and continue to hold this security.


http://www.britishbulls.com/SignalPage.aspx?lang=en&Ticker=FLYB.L