Loganair

[Red Flyer]

How ironic a CEO of an airline that has to be profitable to survive is being told he shouldn’t cut the routes by a route planner for a not for profit business. A business owned by the WG. Who owns CWL?

 

[TOM100]

I agree his response does seem a little confused - if there is strong demand and you match capacity then you can manage yields to your desired level of profit - no ? If they had the aircraft previously (not aware they have reduced their fleet) - why is aircraft resource an issue ?

 

[Jerry]

He stays that they don't have the crews and aircraft yet just launched Belfast to Glasgow up against 28? weekly flights from Easyjet. Hopefully Edinburgh will return one day but I suspect Loganair won't.

 

[Starflyer]

When Flybe moved from the 195 to the 175 on the CWL routes, the reduction of 30 seats per flight should have allowed the yields to strengthen. It didn't -- many of the route yields actually went down because of the continuing need to price-match or at least remain in the very same ballpark as competing services from BRS. All that happened is that the number of empty seats reduced, but the revenue per flight barely shifted. CWL is fundamentally a low yield market now but without the volumes of BRS to support the load factors of larger aircraft that can produce the lower seat costs to profitably fly with those yields.

I hadn't seen the latest bit, but if the revenue on dedicating an aircraft to CWL/EDI on the prime morning and evening slots doesn't cover the lion's share of the fixed costs of that aircraft, there's no point in doing it. Instead, if a CWL/EDI service can productively use off-peak capacity on an aircraft being paid for by another route, then fine. I think what's being said is that the latter is all that could be achieved and even that won't now work.

GLA/BHD yields were about the same as CWL/EDI from memory. With a much shorter flight time, the operating costs are lower. What we also don't know is where the aircraft for GLA/BHD is coming from!

Back to CWL, the biggest problem here is that several posters don't seem to like the answers being given. There's an unspoken thread running through this that the market at CWL simply can't support either the types of fares or the volumes needed to make regional flying work. That's the undercurrent of what is being said, even if you don't like it.

 

[TheLocalYokel]

When Flybe moved from the 195 to the 175 on the CWL routes, the reduction of 30 seats per flight should have allowed the yields to strengthen. It didn't -- many of the route yields actually went down because of the continuing need to price-match or at least remain in the very same ballpark as competing services from BRS. All that happened is that the number of empty seats reduced, but the revenue per flight barely shifted. CWL is fundamentally a low yield market now but without the volumes of BRS to support the load factors of larger aircraft that can produce the lower seat costs to profitably fly with those yields.

I hadn't seen the latest bit, but if the revenue on dedicating an aircraft to CWL/EDI on the prime morning and evening slots doesn't cover the lion's share of the fixed costs of that aircraft, there's no point in doing it. Instead, if a CWL/EDI service can productively use off-peak capacity on an aircraft being paid for by another route, then fine. I think what's being said is that the latter is all that could be achieved and even that won't now work.

GLA/BHD yields were about the same as CWL/EDI from memory. With a much shorter flight time, the operating costs are lower. What we also don't know is where the aircraft for GLA/BHD is coming from!

Back to CWL, the biggest problem here is that several posters don't seem to like the answers being given. There's an unspoken thread running through this that the market at CWL simply can't support either the types of fares or the volumes needed to make regional flying work. That's the undercurrent of what is being said, even if you don't like it.

Obviously I'm not going to ask you how you are privy to the information but accepting what you say it's difficult to see how things might change without substantial subsidy from the airport owner or the Welsh Government, assuming the latter action became legal after 31 December this year if the UK does not mirror EU state aid rules.

Incidentally, it was reported widely in the local news media at the time that when Flybe returned to CWL in 2015 as part of the so-called 'Project Blackbird' the airport company provided a significant subsidy, with several million pounds bandied around. Again, I don't expect you to be specific about that but if a subsidy won't work in order to provide more traveller-friendly timings what will?

The Welsh Government is desperate to be allowed to provide more PSO routes. A couple of years ago ago when the idea was put into the public domain the WG minister for the economy and transport said that, apart from a small marketing budget, the APD-free nature of PSO routes should be enough to attract carriers who would be given exclusivity on the routes in question for four years. He had hoped the routes would be up and running by spring 2019 but the UK Government would not play ball and did not submit the proposals to the EC.

EDI was not one of the proposed routes. They were Glasgow, Inverness, Aberdeen, Manchester, Leeds-Bradford, Humberside, Norwich, Newquay and London (presumably London City).

 

[Jerry]

Sorry but unless someone shows me the actual data I refuse to believe that a route like Cardiff to Edinburgh wouldn't be profitable for an airline like Loganair despite Easyjet over the water. Glasgow maybe and people can call me blinkered for that if they want or any other name they'd care to! Also I was told that before the jets took over CWL-BHD was one of Flybe's most profitable routes and despite just a once a day flight had decent passenger numbers.
I personally wonder if the problem was Flybe's pricing model and not the airport. I believe that they shifted from a model that went from maximising yield per passenger on a route to one that Easyjet uses to maximize the load factor on a route?
In the end will struggle Cardiff maximise its potential as airport and be competitive against bigger airports like Bristol when the UK government won't help small airports and the Welsh government has limited tools to help itself especially during times like this.

 

[Starflyer]

I think you've hit the nail on the head - the only way it will happen is with subsidy. The Flybe subsidy income was a very significant part of the overall equation at CWL and was to remain so after the move to Q400s. The way in which it was done was state aid compliant despite complaints from other airports.

The WG/CWL keen-ness to provide PSOs is another form of permitted subsidy and also exempts flights from Air Passenger Duty so means that a domestic return fare can be £26 lower (2 x £13 APD) without the airline's income being reduced. It's an interesting option for both reasons. You can't normally get a PSO allocated on a route which is being served and at the time of the WG PSO list, Edinburgh was being solidly served by Flybe. Write the list today and I'd be sure EDI would be at the top of it.

 

[Jerry]

The Flybe subsidy income was a very significant part of the overall equation at CWL and was to remain so after the move to Q400s. The way in which it was done was state aid compliant despite complaints from other airports.

How much was the subsidy income % wise to the yeild then?

 

[Starflyer]

The support level was 18% of the overall income at Cardiff. Even then, it was still loss-making against the full costs of the aircraft including all crew costs and a share of the standby aircraft and those needed to cover heavy maintenance. The routes need support - even Edinburgh. CWL-BHD certainly was not one of Flybe's most profitable routes, and I'd question the sanity of anyone who might have told you it was.

 

[TOM100]

So was anything profitable out of CWL for BE ?

 

[Jerry]

The support level was 18% of the overall income at Cardiff. Even then, it was still loss-making against the full costs of the aircraft including all crew costs and a share of the standby aircraft and those needed to cover heavy maintenance. The routes need support - even Edinburgh. CWL-BHD certainly was not one of Flybe's most profitable routes, and I'd question the sanity of anyone who might have told you it was.

I can't remember who told me but I didn't question it at the time. Just curious how you know this information? And if none of the routes were profitable even with support why didn't Flybe pull out?
Also sounds like we may never see the return of those routes if they aren't profitable even with support.

 

[Starflyer]

The routes were covering the direct operating costs of each flight but there wasn't enough left over afterwards to fully cover the fixed costs of aircraft and crews. In this situation, you keep them going until something better comes along. The basket of routes on which each aircraft is tasked are covering at least a portion the aircraft lease costs and crew salaries rather than none at all. If you have a committed lease for the aircraft and have employed the crews, you can't just get rid of all of those costs at will, so have to make the best of it that you can.

 

[TOM100]

and wasn’t that the whole point of Project Blackbird - to cover the costs of the E190 leases. It does beg the question though why they added more capacity outside the scope of the original Blackbird deal ? But then again the root cause of the demise of BE was some poor business decisions. I guess an airline with the right costs and overhead structure could make the routes work but they do sound pretty marginal at best.......

 

[superking]

I was under the impression that the BHD route was a good monet earner for flybe.It was always the last route to get cancelled if there was any problems else where.If my thoughts are correct when BMI BABY ran the route there was no hint of the route not earning any money. Either way it would be nice to see the figures to verify if the route was making money or not,but we will never be privy to that.

 

[TheLocalYokel]

I was under the impression that the BHD route was a good monet earner for flybe.It was always the last route to get cancelled if there was any problems else where.If my thoughts are correct when BMI BABY ran the route there was no hint of the route not earning any money. Either way it would be nice to see the figures to verify if the route was making money or not,but we will never be privy to that.

bmibaby operated from CWL to BFS. In fact, after a couple of years of operation BFS was one of four routes that baby contracted Air Wales to operate on its behalf (PIK, BFS, CDG and ORK) because, according to an anna aero report , the 737s had too much capacity to operate the routes viably, with some other baby routes dropped for the same reason. After Air Wales went out of business in 2006 bmi baby restored their own aircraft to the BFS route and in 2007 Flybe began operating to BHD in competition. Part way through 2010 baby dropped BFS as it prepared to pull out of CWL.

It does seem odd that Flybe should begin operating to BHD when there was an existing service to BFS by baby if the BHD route is not a viable route without subsidy. Perhaps it was an example of poor management decisions by Flybe although this was over three years before the company floated on the Stock Exchange at which time it seemed a good opportunity for investors.

 

[Jerry]

With reference to CWL-BHD I was told that it was one of Flybe's most profitable routes before it when it was one daily on the Q400 before the 3rd based Embraer was added.

 

[Starflyer]

Project Blackbird wasn't properly costed so ended up losing money even then! You're right in that the aim was to put the aircraft into operations to cover their costs, but there were several issues including the maintenance costs being wildly adrift that resulted in the concept being far from successful. That's not a reflection on CWL.

BHD-CWL wasn't strong, but relative to the other CWL routes, it was a slightly better performer than EDI or GLA with average fares about £8 higher than the Scottish routes and about £4 higher than Dublin. All of those were far better than Cork where average fares were nearly half that to Belfast. Rome, Milan, Munich, Berlin and Dusseldorf were absolutely awful. Paris CDG routes from everywhere were difficult because of very high airport costs at CDG.

Average fares on the equivalent routes at Exeter were about £10-15 higher than Cardiff except for Belfast City where they were very close together. (EXT-BHD wasn't that strong either.)

 

[TOM100]

As CWL is seen as a bucket and spade airport, did FAO perform ? If crew and maintenance were major cost factors, could a non based operator with the right aircraft make it work ? Why did they carry on after closing the base ? Was it contractual ?

 

[Starflyer]

FAO wasn't bad - both fares and volumes were OK.

I'm not sure what you mean about non-based operators. They'll still have to earn enough income to pay aircrew and maintain their aircraft if they are based at CWL or elsewhere.

There was a contractual commitment which required continuity of service for quite some time after the base was closed.

 

[Jerry]

It does sound like CWL will struggle to get the ex Flybe routes back, which could then put the government ownership into question.
If the airport can't attract airlines to run routes like Dublin and Edinburgh because they are not profitable or profitable enough, that will put into question the value the airport brings to Wales as a country in connecting the country to it's nearest neigbours not just for leisure but for business as well. As Wales national airport CWL can't just be a bucket and spade airport it and the WG needs to figure out how it can make these routes profitable enough to attract airlines to operate them as the country needs the links.