Flybe answers the no-frills threat

 - May 8, 2008, 4:56 AM

“If you can’t beat them, join them” might well have been the theme for a debate on the challenge posed by the so-called no-frills carriers during last month’s general assembly of the European Regions Airline Association (ERA) in Salzburg, Austria. But in truth, most speakers argued for a more subtle repositioning of some regional air services rather than a belated effort to jump on the bandwagon set rolling throughout Europe by the likes of EasyJet and Ryanair. ERA’s official position is that it prefers the term no-frills to low-cost, arguing that its member airlines were Europe’s original low-cost operators, with much leaner operations than those of the continent’s major carriers.

Jim French, managing director of Flybe (as British European was rebranded earlier this year), said his company’s answer to the explosion in demand for no-frills service has been a “new deal” consisting of “a new look, new fares and new rules.” What the Exeter, UK-based operator has sought to do is to rebrand itself in the middle of the marketplace between the so-called “hard-core no-frills” airlines and full-service carriers such as British Airways.

“What we are doing is fighting the perception that only so-called low-cost carriers offer low fares,” said French. Flybe offers deeply discounted tickets (priced on a one-way basis) that are non-refundable but can be changed up to two hours before departure for a £25 ($38) fee per passenger. Fully flexible tickets can also be purchased.

For the time being, Flybe continues to offer business-class service on three routes from London Gatwick Airport, but French said he expects to drop this distinction in a further bid to streamline the operation. Last month the airline started charging for all in-flight food and drink in economy class. A full 55 percent of all tickets are now sold directly to passengers, with 40 percent of transactions being conducted over the Internet.

Arguably Flybe’s most radical sales point is that it has a firm policy against overbooking flights to avoid alienating passengers with forced bumping from flights and to ensure maximum availability of seats on short notice. Challenged on how this policy could be viable in the long run, French warned ERA delegates that he expects to see the European Commission resort to stiff financial penalties to discourage the industry’s entrenched practice of overbooking.

The Flybe fleet now consists entirely of BAe 146-300s and Bombardier Dash 8Q-400s. French said that to control operating costs, the carrier will not now deviate from this equipment choice. “We can’t get the same seat-mile costs from these aircraft as from Boeing 737s, but we have got to recognize what market we are in and we have been encouraged by the yields we have achieved so far,” said French. Flybe is expected to return to profitability next year.

“Our industry is currently going through a process of evolution, not revolution,” concluded French. “What is causing the problems is the sheer rate of change.”