UK operator Flybe Group is restructuring its previous agreement to take 24 Bombardier Q400s from US carrier Republic Airways, opting instead to take 15 of the turboprops.
Flybe says it is revising the agreement in the wake of “cautious” capacity forecasts for the next two years.
Five of the 15 aircraft have already been delivered to Flybe. Another five due to arrive in 2015-16 have been deferred to 2016-17, which means all 10 remaining Q400s will be delivered in the current fiscal year.
The aircraft were part of a swap under which Republic would take 20 Embraer 175s previously ordered by Flybe.
Under the revised deal, the other nine Q400s out of the batch of 24 will be transferred to lessor Nordic Aviation Capital.
Flybe says that, under a contract with the lessor, it is cancelling obligations to lease nine Q400s, and taking ownership of 10 Nordic Q400s it was under contract to lease.
This ownership agreement involves a cash transaction of £86 million ($124 million) and the aircraft will be delivered over the next 12 months, although Flybe says the contract has “a number of conditions that still remain to be satisfied”.
The changes are part of a strategy to “rebalance” the fleet towards owned aircraft, says Flybe, and away from operating leases, with the aim of achieving a 50:50 mix.
Flybe took ownership of three Q400s – aircraft which had previously been on lease – from Rand Merchant Bank in February.
The deal included a £24.4 million cash consideration, while the carrier subsequently took debt against the turboprops.
It says its acquisition of the 13 aircraft – the 10 from Nordic and the three from Rand – will reduce costs by £4 million over 2016-17 and, afterwards, by a further £8 million per year.
Flybe expects to increase capacity in 2016-17 by 15%, rather than 17%, and by just 6% in 2017-18, compared with the previous figure of 10%.
As part of its capacity limitation effort, the carrier has chosen to postpone deliveries of its four outstanding Embraer 175s, deferring them by a year to January-April 2019.
Flybe has managed to remove the burden of its Embraer 195 fleet by removing and redeploying the remaining 14 aircraft, an achievement which, it says, resolves all of the company’s “key legacy issues”.
Five were returned to lessors in 2015-16. Six others have been placed on contract services at UK regional airports, and the remaining three – including a standby jet – are serving high-demand routes from Manchester and Birmingham.
The company says it “absorbed” some £20 million of costs relating to the 195 fleet during the year to 31 March 2016.
Flybe expects its fleet to comprise 85 aircraft by the end of 2016-17, compared with the 74 at the end of 2015-16. These 85 will include 60 Q400s and 11 Embraer 175s, plus the nine leased Embraer 195s and five leased ATRs for white-label operations.
Source: Cirium Dashboard