10-May-2012 12:53 AM

UK carriers rush to snap up bmibaby’s planned route closures

Analysis

British Airways (BA) is preparing to disband bmibaby, the low-cost unit it unwelcomely acquired from bmi after previous owner Lufthansa failed to find a buyer. But as the saying goes: one man's meat in another man's poison and the news of bmibaby's grounding was welcomed by multiple airlines including Monarch, Flybe and Jet2.com, all of which are swiftly stepping in to backfill capacity.

Anemic-turns-dynamic is not exclusive to bmibaby's network but a development seen following the recent demise of other small- and medium-sized airlines in Europe such as Spanair, Malev and Cimber Sterling. In those cases, competitors have reacted swiftly and within a couple of days to fill the void.

bmibaby's closure is indicative of a recent development in Europe: the lavish injection of capital in loss-making carriers is coming to a standstill with public and private shareholders alike halting the operations of these entities, mostly small- and medium sized airlines, a trend long overdue and induced by low or no economic growth in most EU countries implementing stark austerity measures, and high fuel prices.

Summary

British Airways is planning to disband bmibaby, the low-cost unit it acquired from bmi.
Other airlines, including Monarch, Flybe, and Jet2.com, are stepping in to backfill capacity left by bmibaby's closure.
The closure of bmibaby is part of a trend in Europe, where loss-making carriers are being shut down due to low economic growth and high fuel prices.
bmibaby's network has reduced dramatically over the years, with operations now focused on three bases: East Midlands, Birmingham, and Belfast-City.
Monarch Airlines is expanding its presence at East Midlands and Birmingham airports to capture bmibaby's capacity share.
Jet2.com and Flybe are also adding services from East Midlands, solidifying the airport's position as a gateway for low-cost flights.

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bmibaby to first wind up secondary bases and competitive routes

British Airways is planning two stages to wind up bmibaby, although it remains open to receiving offers that would allow it to transfer ownership and operations to another party. bmibaby has lost GBP100 million over the past four years. "IAG has consistently said that bmibaby and bmi Regional are not part of its long-term plans. Progress has been made with a potential buyer for bmi Regional, but so far this has not been possible for bmibaby, despite attempts over many months by both Lufthansa and IAG," Peter Simpson, bmi interim managing director, said in a statement last week.

Mr Simpson added: "bmibaby has therefore started consultation to look at future options including, subject to that consultation, a proposal to close in September this year. To help stem losses as quickly as possible and as a preliminary measure, we will be making reductions to bmibaby's flying programme from June."

bmibaby's size and network has reduced dramatically over the past years, and it presently focuses its operations around three bases (East Midlands, Birmingham and Belfast-City) with a fleet comprising 12 Boeing 737-300s and two -500s. Last year, as part of yet another restructuring exercise the carrier closed its bases at Manchester and Cardiff. It carried 2.2 million passengers in 2011, down from 4.3 million in 2007.

bmibaby top 10 bases and destinations based on capacity (seats per week): 07-May-2012 to 12-May-2012

The first stage, to be completed by 11-Jun-2012, will see bmibaby's Belfast base closed and services to primarily larger cities (including Geneva, Nice and Paris) from East Midlands and Birmingham suspended. Through the summer, BA will keep bmibaby routes from East Midlands and Birmingham to primarily smaller destinations (including Jersey, Malta and Verona) where competition is less.

bmibaby route suspensions: Jun-2012

Flying from	To	Flight number		Last flight will depart on:
Flying from	To	Outbound	Return	Last flight will depart on:
Belfast City Airport (BHD)	Alicante (ALC)	WW4401	WW4402	09-Jun-2012
	Amsterdam (AMS)	WW4309	WW4310	10-Jun-2012
	Birmingham (BHX)	WW1022 WW1024 WW1026	WW1021 WW1023 WW1025	10-Jun-2012
	East Midlands (EMA)	WW5602 WW5604 WW5606	WW5601 WW5603 WW5605	10-Jun-2012
	Faro (FAO)	WW4507	WW4508	10-Jun-2012
	Ibiza (IBZ)	WW4701	WW4702	09-Jun-2012
	Mahon (MAH)	WW4801	WW4802	Mahon service would not start until 15-Jun-2012, however, this will no longer operate
	Malaga (AGP)	WW4301	WW4302	10-Jun-2012
	Palma (PMI)	WW4601	WW4602	09-Jun-2012
	Stansted (STN)	WW4201 WW4203 WW4205	WW4202 WW4204 WW4206	10-Jun-2012
Birmingham Airport (BHX)	Amsterdam (AMS)	WW1011 WW1013	WW1012 WW1014	10-Jun-2012
	Belfast City (BHD)	WW1021 WW1023 WW1025	WW1022 WW1024 WW1026	10-Jun-2012
	Knock (NOC)	WW1091	WW1092	10-Jun-2012
East Midlands Airport (EMA)	Amsterdam (AMS)	WW5475 WW5477	WW5476 WW5478	10-Jun-2012
	Belfast City (BHD)	WW5601 WW5603 WW5605	WW5602 WW5604 WW5606	10-Jun-2012
	Edinburgh (EDI)	WW5191 WW5193 WW5195	WW5192 WW5194 WW5196	10-Jun-2012
	Geneva (GVA)	WW5225	WW5226	09-Jun-2012
	Glasgow (GLA)	WW5821 WW5823 WW5825	WW5822 WW5824 WW5826	10-Jun-2012
	Newquay (NQY)	WW5101	WW5102	08-Jun-2012
	Nice (NCE)	WW5371	WW5372	10-Jun-2012
	Paris (CDG)	WW5251 WW5253	WW5252 WW5254	10-Jun-2012

bmibaby noted the routes to be suspended in Jun-2012 "are already well served by other airlines and for domestic flights, with the exception of Belfast, other forms of transport are also available for customers. It is hoped therefore that disruption will be minimised for affected customers as alternative arrangements could be made." It is also indicative the routes face intense competition, which has been suppressing bmibaby's yields.

The Belfast base, bmibaby added, "is in its first full year of operation, and still needs investment", making it an easy initial target to stem losses at.

bmibaby route suspensions: Sep-2012

From	To	Flight number		Last flight will depart on:
From	To	Outbound	Return
East Midlands Airport (EMA)	Alghero, Sardinia (AHO)	WW5355	WW5356	08-Sep-2012
	Alicante (ALC)	WW5965 WW5967	WW5966 WW5968	09-Sep-2012
	Almeria (LEI)	WW5411	WW5412	08-Sep-2012
	Barcelona (BCN)	WW5541	WW5542	09-Sep-2012
	Corfu (CFU)	WW5745	WW5746	03-Sep-2012
	Catania, Sicily (CTA)	WW5581	WW5582	09-Sep-2012
	Dubrovnik (DBV)	WW5671	WW5672	09-Sep-2012
	Faro (FAO)	WW5531 WW5533	WW5532 WW5534	09-Sep-2012
	Gibraltar (GIB)	WW5471	WW5472	08-Sep-2012
	Ibiza (IBZ)	WW5811	WW5812	08-Sep-2012
	Jersey (JER)	WW5249	WW5250	09-Sep-2012
	Mahon (MAH)	WW5031	WW5032	09-Sep-2012
	Malaga (AGP)	WW5327	WW5328	09-Sep-2012
	Malta (MLA)	WW5747	WW5748	08-Sep-2012
	Murcia (MJV)	WW5871	WW5872	08-Sep-2012
	Naples (NAP)	WW5553	WW5554	09-Sep-2012
	Palma Mallorca (PMI)	WW5427 WW5429	WW5248 WW5430	09-Sep-2012
	Venice (VCE)	WW5911	WW5912	09-Sep-2012
	Verona (VRN)	WW5275	WW5276	08-Sep-2012
Birmingham Airport (BHX)	Alicante (ALC)	WW1041	WW1042	09-Sep-2012
	Barcelona (BCN)	WW1881	WW1882	09-Sep-2012
	Faro (FAO)	WW1723 WW1725	WW1724 WW1726	08-Sep-2012
	Lisbon (LIS)	WW1587	WW1588	08-Sep-2012
	Malaga (AGP)	WW1031	WW1032	09-Sep-2012
	Murcia (MJV)	WW1757	WW1758	09-Sep-2012
	Nice (NCE)	WW1529	WW1530	09-Sep-2012
	Palma Mallorca (PMI)	WW1843	WW1844	09-Sep-2012
	Prague (PRG)	WW1081	WW1082	09-Sep-2012
	Rome Fiumicino (FCO)	WW1541	WW1542	09-Sep-2012

All eyes on East Midlands base, despite strong Ryanair presence

Ryanair offered so-called rescue fares, which primarily target bmibaby's Belfast hub. Belfast is a two-hour drive from Ryanair's Dublin base, where Ryanair matches bmibaby's Belfast network except for Amsterdam to which it has no services from Dublin.

Monarch Airlines, Flybe and Jet2.com all announced notable expansions at East Midlands, hoping to capture bmibaby's capacity share at the airport, which is owned by Manchester Airports Group (MAG). The LCC off-shoot of bmi is East Midlands' second largest operator, with a 32.6% seat capacity share. The largest carrier at East Midlands is Ryanair, which operates some 40 routes from/to the airport.

Nottingham East Midlands Airport capacity share by carrier (% of seats): 07-May-2012 to 13-May-2012

London Luton-based leisure carrier Monarch Airlines said it would open a base at East Midlands and expand its presence in Birmingham. bmibaby's closure is opportunistic for Monarch, which is in the middle of a turnaround plan to increase its scheduled services to key leisure destinations across the Mediterranean, the Canaries and North Africa.

Commenting on the announcement, managing director of Monarch Airlines, Kevin George said: "As opportunities have opened up in the market, it has become clear that the Midlands will be underserved as a region in the future". Mr George noted that the expansion of its existing services from Birmingham and the launch of operations from East Midlands "makes perfect sense for Monarch, and accelerates the strategy we announced last year to focus on the development of our scheduled operations."

Monarch said it would boost its Birmingham operation with additional frequencies, including to Malaga, Alicanta, Faro, Rome and Palma, as well as open a new route to Barcelona. Its main move will be at East Midlands, where it intends to base aircraft and crew from late summer 2012 and would include destinations of Malaga, Alicante, Palma (Majorca) and Faro. The four routes were some of bmibaby's 10 largest routes (seats) across its network.

bmibaby 10 largest international routes ranked by capacity (seats per week): 06-May-2012 to 12-May-2012

bmibaby is primarily an international carrier with about 70% of all seats deployed to international markets. It currently only operates five domestic routes, although with a relatively large weekly seat capacity.

bmibaby domestic routes ranked by capacity (seats per week): 06-May-2012 to 12-May-2012

The majority of bmibaby's domestic routes are served by other carriers, including Flybe from Belfast to East Midlands and Birmingham; and Flybe and bmi (now BA) from Belfast to London (multiple airports). Only two routes - East Midlands to Edinburgh and Glasgow - currently have no second carrier but Flybe has announced plans to step in. In the meantime, it is offering special fares on its services to the two Scottish airports from Birmingham.

Low cost will continue to dominate East Midlands

Jet2.com and Flybe have joined Monarch in adding services from East Midlands, further enhancing the airport's position as gateway for low-cost short-haul and medium-haul flights. According to data from Innovata, 84% of the airport''s international seat capacity is within Western Europe. Only 14% of the East Midlands' capacity is domestic and 84% of all capacity is deployed by LCCs.

Nottingham East Midlands Airport capacity share by carrier type (% of seats): 07-May-2012 to 13-May-2012

Jet2.com says it will launch eight routes from East Midlands over the next 12 months, flying to Chambery and Geneva this winter and to Dubrovnik, Menorca, Nice, Ibiza, Larnaca and Gran Canaria for summer 2013. It will base an additional 737 at the airport next summer.

Jet2.com CCO Steve Heapy commented: "We opened from East Midlands a couple of years ago with core routes and the services are popular. There is big demand in the region." The carrier already operates from East Midlands to Spain, the Canary Islands, Portugal and the Eastern Mediterranean.

bmibaby's anticipated grounding also has prompted Flybe to bring forward plans to start new routes to Amsterdam, Paris Charles de Gaulle, Edinburgh, Glasgow and Jersey from East Midlands Airport to early summer. Flybe had originally planned to run these from October. It is also planning to double its existing weekday flights from East Midlands to Belfast City Airport to four per day while adding more capacity on its Birmingham-Belfast route.

Flybe UK MD Andrew Strong commented: "We have been surprised at bmibaby's decision to close some of its routes within just six weeks time and as a result we are doing everything we can to work with our airport partners in ensuring that those passengers wanting to travel from East Midlands Airport are not left stranded."

The grounding of bmibaby is, of course, not really a surprise. After four consecutive years of losses and multiple restructuring efforts, management was unable to make it a profitable endeavor and its new owner, British Airways, was not interested in negative baggage as part of its bmi acquisition.

UK carriers rush to snap up bmibaby’s planned route closures

bmibaby to first wind up secondary bases and competitive routes

All eyes on East Midlands base, despite strong Ryanair presence

Low cost will continue to dominate East Midlands

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