Dalrymple finds a new niche at Flyglobespan

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Flyglobespan is not your typical transatlantic carrier. The Scottish carrier operates an unusual mix of aircraft over the Atlantic, including Boeing 757 and 737 narrowbodies. It has unusual gateways, such as Knock in Ireland and Exeter, Liverpool and Doncaster in the UK. And it has a unique business model, offering frills for economy class passengers and full business class on some flights, but strictly no frills and all-economy class configurations on others.
Flyglobespan is often grouped as a leisure carrier and sometimes as a budget carrier, but chief executive and founder Tom Dalrymple considers it neither: “I like to say we’re new generation. The old leisure term doesn’t fit in the game everyone is now trying to play in. We’re in the middle of the price range.”

Flyglobespan clearly has leisure roots. Dalrymple founded the company in 1974 as a tour operator and launched the airline unit in early 2002, after deciding in the aftermath of the 11 September terrorist attacks that he did not want to rely any longer on other carriers.

“After 9-11 things in this industry started happening very fast,” he recalls. “Sitting as a tour operator, we decided we needed to do something … We knew our market. All we had to do is replace the lift we were buying. We didn’t consider it very adventurous. It was an obvious step to take.”

It turned out to be the right move. Flyglobespan has posted a profit every year since the airline launched, including a £5 million ($10million) pre-tax gain for the 12 months ending 31 October 2006. “We’ve had a non-stop stream of profits since the day we launched,” Dalrymple says.

Dynamic package
Combining hotels, car rentals and tours with air tickets turned out to be a winning formula. Flyglobespan is purely a scheduled carrier but 40% of its passengers flying to Europe and 60% of its passengers flying to Florida buy other services while they are at Flyglobespan.com.
“We were the first operator in our field to dynamically package,” Dalrymple says. “Even today it gives us a competitive advantage because easyJet and Ryanair farm all of that out.”

The airline, which this year will carry more than two million passengers, has quickly grown to become larger than the original tour business. The airline now accounts for 80% of Flyglobespan’s revenues, which exceeded £200 million in the last fiscal year.

Bringing the airline to the people
For the first four years, Flyglobespan focused on leisure destinations in the Mediterranean, primarily from regional airports in the UK. Dalrymple says it now flies to 13 airports in the UK, with crew bases at eight of them. “It’s truly a philosophy of bringing the airline to the people. If you sell only London, the icon, it’s a lot easier.”

Flyglobespan only operated 737s the first four years, slowly growing its fleet to two 737-300s and four 737-600s. It took the big plunge last June, when it launched transatlantic services, initially operating only one 767-300ER and one route, from its Glasgow base to Orlando Sanford in Florida. This summer it has become a serious transatlantic player, operating a mix of 767-300ERs, 757-200s and 737-700s from 13 airports in the UK and Ireland to six North American destinations: Boston, New York Kennedy, Orlando Sanford, Calgary, Toronto Hamilton and Vancouver.

Most of the 767s were formerly operated by Air New Zealand and Flyglobespan has opted not to remove the 24 business class seats with 50in pitch. There is also a 60-seat premium economy section on Flyglobespan’s 767s with 34in pitch in addition to 162 regular economy seats with 32in pitch.

Flyglobespan also has kept the 22 38in pitch business class seats on its 757s, which were formerly operated by Icelandair. The rest of the cabin consists of 167 economy class seats with 30in pitch but Flyglobespan still sells a separate premium economy section which includes complimentary lounge access, in-flight entertainment, alcoholic drinks and a choice of meals. Flyglobespan sells the same premium upgrade on its 737s, although all the seats have the same 30in pitch.

Regular economy class passengers flying longer-haul routes to western Canada receive complimentary meals and non-alcoholic drinks but must buy headsets and alcoholic drinks. For flights to eastern Canada, a pure no-frills service is sold and passengers must even purchase their non-alcoholic drinks and meals.

No frills
Dalyrmple claims Flyglobespan is the first carrier to offer a pure no-frills service over the Atlantic and says passengers do not mind because it is only sold on flights of less than eight hours. He also claims that although the service offering varies by destination, passengers do not get confused: “I don’t think there’s any confusion at all. It’s like any menu at any restaurant. It works fine. All the planes are full.”

The carrier now has six transatlantic-capable aircraft – two 767-300ERs, two 757-200s and two 737-700s – although two of these will be used this summer for other missions, including a 737-700 for European flights and a 767 that is being wet-leased to Air India. Flyglobespan is already committed to expanding over the next few months its transatlantic-capable fleet to 10 aircraft, with two more 767s and one more 757 to be placed into transatlantic service later this month and another 767 to follow in August. That will give the carrier 10 transatlantic-capable aircraft by the end of the summer season, but it is not yet committed to acquiring additional 737s, 757s or 767s beyond September. “Do we intend to get more? Yes,” Dalrymple says.

He acknowledges 737s, 757s and 767s are difficult to find these days but is confident he can find a “sufficient number” before the 2008 summer season. “Nothing is easy in the acquisition game but we’ve been successful in single acquisitions of aircraft,” he adds. “We look at a lot all the time. We’ll expand with 737s, 757s and 767s as opportunities occur.”

Dalyrmple is the master of doing a lot with few aircraft. For example with one 767, Flyglobespan now connects eight UK airports with Toronto Hamilton. Dalyrmple explains the 767 is based at London Stansted and flies every day to Hamilton, but every day the aircraft makes an intermediate stop at a different UK city before proceeding to Canada.

“We have to cover all our historical pick-up points and we have to cover all our historical entry points in Canada,” Dalyrmple explains. “We decided Stansted-Hamilton would be quite a fragile service in its first year so we decided to stop it en route.”

During the winter season Flyglobespan only had one 767 but was able to maintain routes from Manchester to Toronto Pearson and to Cape Town in South Africa, as well as from Glasgow to Orlando via Belfast. The aircraft was even kept on the ground for two days per week in Cape Town while the crew rested. “It was a courageous move,” Dalyrmple says, adding it worked because the yields to South Africa are so high during the northern winter season. “We will duplicate it this winter and we’ll also do two Johannesburg services and possibly a third to Cape Town.”

Before even launching long-haul services Dalyrmple was so confident they would succeed he took the bold move of signing up for two 787s from International Lease Finance. The aircraft will be delivered in 2010 and Dalrymple is now trying to secure more early delivery slots for the 787. But he acknowledges 2015 is now “the best case scenario” unless some earlier slots are returned to the pool, in which case he is ready to pounce. “The 787 is an animal with enormous capability,” he says, adding Flyglobespan was one of the first carriers to commit to the 787 because its range, low operating cost and dedicated crew rest area make it the perfect aircraft for 10-hour flights.

Flyglobespan currently leases all its aircraft except for its 737-600s. Dalyrmple says he is now looking at ordering aircraft directly from Boeing and is considering a public offering to help fund the purchase. Dalyrmple owns Flyglobespan and until now has been “funding the entire thing on positive cash flows and profits.” He has been toying with the idea of an initial public offering for several months: “I keep scratching my head. If we go the route of buying aircraft we will need to do it.”

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