Flybe is building for a sustainable profitable future
Our strategy remains on track to reduce our fleet size to an optimum level for the number of identified profitable routes and make the business demand-driven rather than capacity-led. As previously announced, fleet numbers peaked in May 2017 at 85 aircraft, as legacy aircraft orders have been largely fulfilled. We now plan to reduce the fleet size over the next three years to around 70 aircraft in 2019/20 (including the five ATR aircraft fulfilling the SAS White Label contract). We will hand back six end of lease Bombardier Q400 aircraft this financial year, of which four have already been returned (two during H1 and two in October/November). Each handback is benefiting from the experience gained on the prior handbacks.
Capacity will start to fall in the second half as further handbacks take place and there are two main benefits arising from our ability to control our fleet size. Firstly, we are able to focus our resources on fewer, more profitable routes; five loss making routes have already been closed. This delivers improvement in our load factors and helps to maintain yield. Secondly, the greater stability in our route network will give operational efficiencies and better customer service.
Load factors were 76.0% in H1 2017/18, up 4.0 percentage points on H1 last year with the Q2 improvement being even stronger than Q1. Average passenger yield was £72.73, up 3.0% on last H1. As a result, passenger revenue per seat was up 8.8% in the first half, significantly ahead of the capacity growth of 3.0%.
Scotland remains a core part of our network and we are further strengthening our connectivity in Scotland. The new Heathrow routes continue to perform in line or ahead of our expectations, and our turboprop aircraft are now an established part of Heathrow’s operations. In addition, we recently embarked on a commercial partnership with Eastern Airways, franchising Eastern’s existing routes as Flybe. We have also launched six new partnership (risk-sharing) routes with Eastern, both within Scotland and connecting Scotland to England which also provide links to Flybe connecting flights. This helps to further support Flybe’s long-term ‘One Stop to the World’ model, connecting our passengers through our own network, plus codeshare and interline partners.
As part of our Sustainable Business Improvement Plan, we are working hard on improving despatch reliability and on time performance (‘OTP’), key issues for our passengers. The first priority was to reduce the number of flight cancellations, particularly due to aircraft serviceability issues, resulting in a 35.3% improvement compared to the same period last year. However, arrivals OTP was 78.1%, 3.6 percentage points below last year. In part, this is because we have been making extra efforts to fly sectors and not cancel them, even if they run late. Poor weather and air traffic control issues have also been factors this year. Technical Despatch Reliability (‘TDR’) was 99.1% for the Q400 in the first half with a TDR for the Embraer jets of 99.3%.
In response to this we have worked alongside Bombardier to improve Q400 reliability, resulting in Q400 TDR improving by 10 basis points on last year. However, this resulted in increased maintenance expenses in Flybe UK. Maintenance costs have also been affected by the fall in the value of sterling, as most spare parts and rotables are priced in US Dollars, and the H1 cost associated with the handbacks. We are taking a fresh look at our maintenance strategy and operational processes to address the increase in maintenance costs and working with Bombardier on resolving common issues.
Plans have now further progressed on designing and scoping the new digital IT platform. Flybe will partner with Amadeus to implement a new passenger service system which will provide customers with a significantly enhanced online experience from searching for a flight to landing at their end destination. This will help Flybe to drive additional revenues, improve efficiency and radically improve the online customer experience.