A version of this article appears in the September 8 MRO Edition of Aviation Week & Space Technology.
U.K.-based low-cost carrier Flybe will decide by the end of September whether to outsource its Flybe Aviation Services MRO arm and training activities confirmed the airline’s new CEO, Saad Hammad, who has spearheaded its recovery.
“The majority of [our MRO] business is third party,” adds Paul Simmons, Flybe’s CCO. “Obviously, we need to train our staff and maintain our aircraft. The question is whether [the divisions] are core or non-core, whether we should retain the business, dispose of it, form a partnership, or a combination of those options. By September we should have clarity and certainty on which way to go.”
In 2013-14 internal work made up just 40.1% of Flybe’s labor hours, compared with 59.1% for third-party customers.
The decision on the future of the MRO and training divisions is part of a review of non-airline assets, one of Flybe’s six major priorities for its 2014-15 financial year. These are part of a bloody restructuring that saw more than 1,100 jobs cut, an almost complete replacement of senior management, multiple aircraft lined up for return to lessors, and a full rebranding. This hard-hitting restructuring has paid off, with the airline delivering £47 million ($79.8 million) in cost savings for 2013-14.
Notably for Flybe Aviation Services, the airline decided its 14 Embraer 195 118-seat regional jets were no longer needed. Four are still flying, but 10 were grounded at the end of March. Five will return to lessors during 2014-15, three should continue flying through winter 2014-15, and Flybe is in discussions with other airlines over possible white label or subleasing opportunities for the remaining six.
Flybe Aviation Services is now managed as a profit center and reports as a separate unit. It continues to provide third-party maintenance for the BAe 146/RJ, ATR turboprop and Bombardier Q400 aircraft types, as well as MRO services for Flybe’s own fleet.
In 2013-14, Flybe Aviation Services’ revenue fell £5.1 million—from £40.5 million last financial year to £35.4 million this year—but profit before tax actually rose £7.3 million, from a loss of £5.1 million to a profit of £2.2 million. This is largely due to labor cuts that reduced Flybe and third-party hours from 526,000 to 455,000. “[This] 13.6% reduction in man-hours and 12.6% [reduction] in revenues was more than offset by 16.6% in cost savings,” says Flybe.
Commenting on the future, Hammad says: “While we are not yet operating at full potential, we have moved back into profit . . . I am looking forward to building a profitable and successful Flybe that is capable of exploiting the many opportunities before it. We have the employees and operational capability to become the best local airline in Europe.”
But there is still hard work ahead. “We need discipline, discipline, discipline. That is how we create value in our business,” Hammad asserts.