Eastern Airways managing director and part-owner Richard Lake likes to do things differently. He proudly boasts that the regional carrier’s strategy of “doing the opposite of what the market tells us” has led to 10 years of consistent profitability, and says he is now looking forward to “Easternising” the UK and continental Europe through further expansion.
The Humberside, UK-based airline, which Lake refers to as “aviation’s biggest secret”, is planning additional domestic growth, and also aims to open bases in two central European countries within 12 months. “We will continue with our lateral expansion, and we see opportunities within Europe to use the Eastern model,” says Lake, adding that the carrier is in talks with a number of airports in undisclosed countries in central Europe.
Eastern made its first foray into international scheduled services in late 2005 when it launched flights from Southampton to Brussels. The all-turboprop operator now also serves the Belgian capital from Durham Tees Valley airport in the northeast of England.
On the domestic front, Lake says the carrier is evaluating “four or five” new routes, although he declines to provide further details. Eastern pulled out of London City earlier this year because the airport’s new owners increased charges until they became “too expensive”, he notes. However, the airline does not rule out the possibility of serving other London airports in the future.
Lake, who has no previous aviation experience, established Eastern Airways in 1997 with the intention of providing business travellers with a “better” alternative to existing regional airlines and “the appalling train and road network” in the UK. He holds a 50% stake in the airline; the other half is owned by Eastern Airways chairman Bryan Huxford.
“Eastern Airways was created to provide regional niche services to the oil industry between Humberside and Aberdeen,” explains Lake. “But the more we got involved in flying people from A to B, the more we realised that the regional airline business was a disaster to some extent, with poor passenger pleasures. We realised there was an opportunity to do it right and embarked on a strategy of ‘Easternising’ the UK with high frequency services between points.”
The biggest problem with the UK regional airline sector, according to Lake, was that carriers were “leveraging inappropriate aircraft on to routes that didn’t justify them, making the routes uneconomical”. He adds that the market is “elastic” and that Eastern’s philosophy has always been “frequency over capacity”.
The carrier now serves 17 airports with over 800 flights a week, and operates an all-turboprop fleet consisting of 24 29-seat BAe Jetstream 41s, three 18-seat BAe Jetstream 32s and four 50-seat Saab 2000s. It will take delivery of its fifth Saab 2000 in the near future. Lake says he is currently in discussions with Bombardier over the possibility of purchasing an undisclosed number of 50-seat Dash 8 Q300 turboprops to be added to Eastern’s fleet within 12 to 15 months. In addition, the carrier will “probably add three to four” more Jetstream 41 and/or Saab 2000 aircraft this year.
Eastern used to operate an Embraer ERJ-145, but does not plan to re-introduce regional jets to its fleet in the future. “We experimented with regional jets but decided that the economics for a 50-seat aircraft would make them become dinosaurs,” notes Lake.
Competition? What competition?
Lake forcefully dismisses the concept of competition in the aviation industry as “overblown and crap”, and does not seem worried about the potential threat of other regional or low-cost airlines entering Eastern’s market. “Airlines, in general, are driven by daft egos and most don’t even make any money,” he says. “Price isn’t everything – we consistently turn out a good passenger proposition.”
Eastern last year increased its net profit by 17% year-over-year, which Lake says is a “typical growth figure” for the airline. In 2006, the airline carried 850,000 passengers and the average load factor was 50-55%. Lake attributes this modest figure to emptier flights operated in the middle of the day, but says these flights will stay in place to offer flexibility to passengers who wish to re-book on an earlier flight. Two-thirds of Eastern’s passengers are business travellers. The airline also operates a charter service which accounts for 15% of its revenue.
In addition to offering frills such as free champagne on board all flights, Eastern has invested in providing fast-track security channels to passengers at all the airports it serves, which Lake says allows for reduced check-in times of no more than 20 minutes. “We’re not an airline, we’re a transport company,” he insists. “I’m so critical of the airline industry – what we offer is far superior. We’re not here to cater for the lower end of the market. We satisfy a niche in the market extremely well.”
Lake says the fact that Eastern “doesn’t answer to shareholders” means the carrier can “invest an enormous amount back into the business”. For instance, it has invested in providing in-house maintenance to its Jetstream 41 fleet, and has made a “substantial investment” in acquiring a Jetstream 41 simulator to train its pilots on-site at Humberside airport. The airline’s 250 Humberside-based employees have been provided with an on-site gymnasium and have free access to a personal trainer and nutritionist who visits the site three times a week.
And you can be certain that Lake has no future plans to float shares in the company. “IPOs and the stock market take a property like an airline and financial wheeler dealers then try and wring its neck,” he says.
Lake seems to take pride in the “personal touch” which he says Eastern offers its passengers, a touch he believes is becoming increasingly rare in the airline industry. “As the market gets more sterile, passengers are being forced down a faceless route and this leaves a section of the travelling public marginalised.” And he seems fiercely determined to stick to that belief and continue serving this niche, in spite of the changes going on around him in the ever-evolving airline industry.
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