flybmi goes into receivership, all flights cancelled – why did it happen?

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flybmi (not to be confused with Flybe) went into administration on Saturday evening.

All flights were cancelled with immediate effect.

This is the official statement published on their website:

British Midland Regional Limited, the East Midlands-based airline which operates as flybmi, has today announced that it has ceased operations and is filing for administration.

flybmi operates 17 regional jet aircraft on routes to 25 European cities.

All flights have been cancelled with effect from today. Customers who booked directly with flybmi should contact their payment card issuer to obtain a refund for flights which have not yet taken place. Customers who have booked flybmi flights via a travel agent or one of flybmi’s codeshare partner airlines are recommended to contact their agent or airline for details of options available to them. Customers who have travel insurance should contact their travel insurance provider to find out if they are eligible to claim for cancelled flights and the procedure for doing so.

A spokesperson for flybmi said:

“It is with a heavy heart that we have made this unavoidable announcement today. The airline has faced several difficulties, including recent spikes in fuel and carbon costs, the latter arising from the EU’s recent decision to exclude UK airlines from full participation in the Emissions Trading Scheme. These issues have undermined efforts to move the airline into profit. Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe and lack of confidence around bmi’s ability to continue flying between destinations in Europe. Additionally, our situation mirrors wider difficulties in the regional airline industry which have been well documented.

“Against this background, it has become impossible for the airline’s shareholders to continue their extensive programme of funding into the business, despite investment totalling over £40m in the last six years. We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable.

“Our employees have worked extremely hard over the last few years and we would like to thank them for their dedication to the company, as well as all our loyal customers who have flown with us over the last 6 years.”

Why did flybmi go bankrupt?

Where was flybmi flying?

flybmi carried just over 500,000 passengers on 29,000 flights last year, using a fleet of 17 Embraer aircraft.

The airline had three main bases, in Aberdeen, Bristol and Munich, with its head office at East Midlands Airport. flybmi served Aberdeen, Bristol, Brno, City of Derry, Dusseldorf, East Midlands, Esbjerg, Frankfurt, Hamburg, Jonkoping, Karlstad, London Stansted, Lublin, Milan Bergamo, Munich, Newcastle, Norrkoping, Nuremburg, Oslo, Paris Charles de Gaulle, Rostock/Laage, Saarbrucken and Stavanger.

As well as flying under its own brand, it sold tickets under codeshare deals with Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti.

The airline is the final remnant of the old British Midland. After IAG acquired BMI in 2012, IAG sold the non-core routes which did not fly into London to Sector Aviation. In 2015 it came under the control of Loganair’s owner Airline Investments.

It is important to note that Loganair is not impacted by this announcement, despite the two airlines having the same parent.

Why did flybmi go into administration?

Whilst flybmi is not related to Flybe, there is no doubt that the two airlines had been facing the same issues in recent months. This move may give Flybe the opportunity to pick up a few of the better performing routes.

Let’s be clear about one thing though – flying 522,000 passengers on 29,000 flights in 2018 means an average of just 18 passengers per flight. An Embraer E145 can seat 49 people whilst an E135 holds 37, so we are looking at very weak loads. Whatever factors are being blamed for its closure, the answer may be closer to home than the airline wants to admit.

Category

General

This article is closed to new posts. Discussion continues in the HfP Forums.

Chris Palmer says:

17 Feb17 February 09:00

There is also this:

“The spike in the carbon cost arises from the EU’s recent decision to exclude UK airlines from full participation in the Emissions Trading System.

This decision was made on 19 December last year, after the Commission had become concerned about retaining the integrity of the EU ETS after Brexit.

Thus, it decided temporarily to suspend processes related to the UK in the Union Registry. It also adopted an amendment to the EU ETS Registry Regulation to lift the marking of allowances issued by the UK during the transitional period in case of ratification of the Withdrawal Agreement.

The suspension of UK-related processes in the Union registry, we are told, takes account of the fact that, on the basis of the current legislation, from 1 January 2019, any allowances issued by the UK would need to be identified by a country code (“marked”) and excluded from surrender.

In order to prevent the temporary issuance and circulation of marked allowances until there was clarity on whether or not a Withdrawal Agreement would be ratified and enter into force, the Commission decided temporarily to suspend the acceptance by the Union Registry of all processes for the UK relating to free allocation, auctioning and the exchange of international credits.

Consequently, from 1 January 2019 onwards the UK will not be able to auction allowances, allocate allowances for free to operators or exchange international credits for as long as this suspension remains in place. Only after both the UK and the EU have deposited their instruments of ratification of the Withdrawal Agreement with the Secretary-General of the Council will the suspension be automatically.

Perversely, BMI Regional claimed to have been the first UK airline to complete the 2012 ETS cycle. This meant that the airline was among the first of more than 11,000 airlines, power stations and industrial plants in 31 countries to adhere to a “cap and trade” method of carbon emissions reduction.

Now, having fully bought into the scheme it has been caught by the suspension of the scheme for UK airlines, having to fund the additional carbon credits which hitherto it had been allocated free of charge.

Currently, under the ETS, the free allocation amounts to 82 percent of airline credits. Three percent are held back for high-growth airlines and the 15 percent balance is auctioned. A credit needed to cover each tonne of carbon dioxide emitted. Auction values are currently about €23 per tonne,

No details of the costs involved for FlyBMI have been released and data are not easy to find at short notice. To give some idea of the sort of costs involved, some earlier costs of carbon offsets were set at £1.60 for a return London-Paris flight and £3.00 for London to Frankfurt.

Another indicator of the sort of money involved comes from calculations on costs passed on to customers, who are required to pay even for the free allowances.

According to a study by a Dutch environmental consultancy, airlines profited up to €1.36 billion in 2012 by passing on “imaginary” costs. At the time, Ryanair was adding a 25p “green” tax levy to all bookings to cover the costs of the scheme.

With Flybmi having carried 522,000 passengers on 29,000 flights in 2018, overall ETS costs are likely to be substantial. In its formal statement, the airlines says that while the summation of issues have undermined efforts to move the airline into profit, current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process.

“Against this background”, it says, “it has become impossible for the airline’s shareholders to continue their extensive programme of funding into the business, despite investment totalling over £40 million in the last six years. We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable”.

Predictably, the media focus is on the human interest aspects of this drama, so it has not been fully registered that a major factor has been the failure by the Westminster parliament to ratify the Withdrawal Agreement. For other British Airlines, the pain now only goes away when the agreement is fully ratified but, for Flybmi, this will come too late – if it comes at all.

Presumably, British Airways will be similarly affected but, again, no precise costs are available. However, in 2011, it was reported that the airline faced a bill of nearly €50 million a year, the highest of any airline, when carriers around the world were brought into the ETS, and that was based on 81 percent of allowances being allocated free.

If the free allowance is removed, theoretical annual costs could rise by as much as €300 million, for as long as it took to regularise the scheme for the UK – with or without the Withdrawal Agreement. UK air cargo operations will also be looking at their costs. Sources for auctioned credits must also be established, and the loss of auction rights will have financial implications.

On the other hand, if the UK sorts itself out and ratifies the Withdrawal Agreement, UK operators remain subject to EU ETS compliance obligations for emissions in the years 2019 and 2020. But the marking and the exclusion from surrender of allowances issued by the UK would no longer be necessary. Costs would revert to normal.

Whatever does happen, Flybmi will stand as an unexpected casualty of Brexit uncertainty, costing 376 jobs and damaging a number or regional airports, which rely on the airline, including Bristol, East Midlands and Edinburgh. In what is appropriate for a Brexit-related issue, regional connectivity with Brussels will also be badly affected.”

Source: http://www.eureferendum.com/blogview.aspx?blogno=87150
Alan says:

17 Feb17 February 09:10

I flew 3 return flights on FlyBMI and I really enjoyed each one of them. I have to say that each one had plenty of empty seats – one flight back from Hamburg had 7 passengers!

Sad to see them go.
Sam Brown says:

17 Feb17 February 09:51

I have a flight booked with Lufthansa that says one leg is operated by BMI regional. That leg is from an airport (Karlstad Sweden) that only has these two flights to Frankfurt a day (including a technical stop in Jonköping). So refund or no, there is no alternative way to make my journey! Does Lufthansa (since I booked it a with them and both legs have LH flight codes) have a responsibility to get me to my destination? Am I crazy by imagining them chartering planes to fulfill those journeys???
- Shoestring says:
  
  17 Feb17 February 10:02
  
  If you booked through Lufthansa, you’re OK financially – they should make alternative arrangements for you or give you a refund. Highly unlikely they’d charter planes. Interesting to see what they offer you if you insist on re-routing.
- Rob says:
  
  17 Feb17 February 10:37
  
  Lufty will sort you out but if there is no sensible alternative then it can decide to refund you.
Steven Adby says:

17 Feb17 February 11:59

I never even knew they existed and I live in the E Midlands near their operational HQ! Wow – great marketing, guys.You aren’t going to fill many planes if nobody knows you exist. I have never once seen any adverts for them ANYWHERE. Annoying too as I would certainly have used them.
As an aside, unbelievably (when I last checked) you cannot fly from EMA to Paris! Incredible for such a large catchment area.
- sunguy says:
  
  18 Feb18 February 12:54
  
  And here in lies the ENTIRE problem – a couple of friends and I were talking about them at the weekend; they were completely unaware that BMI still existed…..
  
  They seemed to want to rely entirely on word of mouth and the previous incarnation of the brand.
  
  A few local radio ad campaigns, newspaper and the odd TV promo would have done them a world of good me thinks….including reminding the public that the airline still existed!
Russ says:

17 Feb17 February 12:05

I’m not feeling particularly magnanimous today so reading twitter comments from ‘stranded’ people bemoaning they can’t afford a hotel or fly home under their own steam with little empathy. They’re not exactly looking for alternative return long hauls in F or, a suite plus dinner off the à la carte menu at the Waldorf. Surely everyone who goes out of the front door should have enough savvy to keep enough funds aside for getting home?
- Ian says:
  
  17 Feb17 February 12:11
  
  My sentiments exactly – but the media will no doubt devote acres of space to imprudent, uninsured people.
  - Julian says:
    
    17 Feb17 February 13:18
    
    My only area of sympathy is the highly exploitative fare levels frequently charged by many so called “low cost” and other airlines for booking seats only two or three hours before departure on aircraft that are nowhere near full and where the equivalent fare yesterday or the day before for travelling on that same flight was only £29 rather than the current £299 one way or more.
    
    In fact when BA closed the gate early on me on a flight from PMI to LHR in April last year the price Easyjet wanted one way to get on their flight going in two hours time to Gatwick was 500 Euros one way. But the flight I booked with BA to LHR only two days later was only 39 Euros one way.
    
    There is no excuse for these disgusting late booking fares for booking same day except in cases where those are literally the last seat of two on the aircraft. Al the more so where these customers have been stranded through no fault of their own by the failure of another airline.
    
    So that is why a lot of people get excited about such an airline failure as they usually feel their employer expects them back at the work on the day they agreed when booking time off work but other airlines too often charge disgusting penal fares for booking seats same day to customers already in distress, who they surely ought to be willing to accommodate at a sensible price as a matter of public responsibility and so as to acquire the loyalty of those customers to that airline brand in future. Same thing is true with the bereaved who usually need to go right now and are subjected to these disgusting last minute penal fares.
    
    This is one of the few good reasons for collecting Avios since as long as a flight is still available (often is these days in Club short haul) the number of Avios and charges are the same as any other Avios redeemable flight.
    - Brian P says:
      
      17 Feb17 February 19:45
      
      Julian “In fact when BA closed the gate early on me on a flight from PMI to LHR in April last year the price Easyjet wanted one way to get on their flight going in two hours time to Gatwick was 500 Euros one way.” –
      
      I’m not sure why you are expecting Easyjet to rescue you for a BA issue.
      Easyjet do have a ‘Rescue Fare’ – £90 to get on the next flight if you arrive at the airport within 2 hours of departure time. Seems ok.
- Lady London says:
  
  17 Feb17 February 14:55
  
  I’m not sure. Having flown around the world on a shoestrong when I really needed to see family who might not be there much longer, and being impecunious. sometimes you just have to take the risk and travel.
  
  Most travel insurance isn’t worth the paper it’s written on – it takes a while to find the few that will really cover you when you;re in a jam. Financial failure of the airline covering you often has to be paid for extra now and it’s not always seen that many policies don’t actually include it in any way.
  
  At least it wasn’t a long haul airline leaving people stranded much furhter away.
  
  After Lufthansa and British Airways picking over bmi and grabbing the best bits and basically grounding it, what else was left? I think bmi was always going to have a hard time after that.
  - Mikeact says:
    
    17 Feb17 February 15:26
    
    So, let’s blame Lufthansa and BA ? Is that what you’re getting at ? Rubbish.
  - John says:
    
    17 Feb17 February 15:30
    
    Agree.
    
    Also, many of those caught out in these collapses are backpacker types, who will mostly end up as taxpayers (as many readers of this site must have done, myself included).
    
    Remember seeing a Rod Stewart interview ages ago, about how busking as a teen on the continent went wrong, and he ended up owing FCO money for his repatriation to Blighty.
    
    UK consular officials never seem to be as proactive as those from other countries, in terms of arranging bulk bookings etc.
    
    We should all expect a better service in general from that part of the government, even if we’re fortunate enough not to be requiring direct assistance this time round.
    - Shoestring says:
      
      17 Feb17 February 16:38
      
      I can’t see why the British taxpayer should pay for repatriating British people whose airline has gone bust.
      
      Just because they happen to be British, is that your thinking? Sod ’em, we’re not some big family.
      
      Some miniscule levy on all fares, which covers repatriation in this scenario – that would be fairer.
- NFH says:
  
  17 Feb17 February 17:24
  
  Exactly. And they probably ignored the often-repeated advice to pay always with a credit card for flights costing more than £100 in order to be protected by Section 75 of the Consumer Credit Act 1974. Unlike a simple chargeback, Section 75 covers the cost of remedying the breach of contract, i.e. replacement flights, which will usually be at a much higher price than the original flights. A chargeback is usually limited to only the original transaction amount.
- sunguy says:
  
  18 Feb18 February 13:07
  
  Not quite – as someone who once didnt have very much money and lived from payday to payday having to “cash a cheque” 2-3 days before payday to get by sometimes (in the days of a cheque guarentee card)….working out exactly what flights and hotels I could just about afford, etc…I know how it feels….
  
  What would you rather – people just dont go on holiday even though they can afford the outlay on the “just incase the airline or hotel goes bust” ?
  
  Please, get real….
  
  Also, we around here know a thing or two about travel, but your ordinary Joe Bloggs who gets his info “down the pub on a Friday night from the guy whose wifes best friend once worked for 2 minutes in a travel agents on a work experience”, might not have any sort of clue about what they are doing….and not know that you should always book on a credit card….(Ive also been guilty of said idiocy – prior to knowing better).
  
  Or what about those that do not have a credit card ? (either dont qualify or dont have a limit high enough – I once had a credit card with a £500 limit, or maybe just like paying for things in cash and “always know how much money they have”….either thinking that a credit card always costs more and have to pay interest or that they dont trust themselves with having access to cash they dont have).
  
  These folks do have my sympothies and as much as I cannot stand the man or the painful programmes he makes, Martin Lewis is at least talking on a level that some folks will understand into making better judgement calls when booking travel (or anything for that matter).
  
  However, it still leaves people who are far less educated in our subject matter open to doing something that isnt the best of ideas and biting them in the proverbial later….
  
  …..rant over…….
Charlieface says:

17 Feb17 February 12:16

Isn’t a move of five hours defined as a cancellation anyway? Also worth checking the flight numbers, if they changed it’s a cancellation as well even if it only moved 5 min.
- barry says:
  
  17 Feb17 February 16:24
  
  Yes, but I seem to remember that a few years ago a “cancellation” didn’t trigger my travel insurance where as a (less disruptive) “delay” did. So cancellation may be better for EU compensation but not necessarily insurance
Tony says:

17 Feb17 February 17:18

Are we going to see Loganair pick up some of the routes since owned by the same people.
Recently at least one of the jets was transferred from Bmi regional to Loganair so be interesting to know if aircraft are leased or owned.
Bet Eastern Airways glad they are owned by I believe same people as own Bristow Helecopters so they will also no doubt be interested in some routes as well.
Big loss of connectivity as am sure Flybe under new owners will bin a lot of routes.
- Shoestring says:
  
  17 Feb17 February 17:57
  
  both part of Airline Investments Limited – so hardly surprising
  - Graeme says:
    
    17 Feb17 February 18:07
    
    Yes. Thats why i suggested planned. Easy way to get rid of the unprofitable routes and keep the profitable ones. All happening quickly.
- Alan says:
  
  17 Feb17 February 22:16
  
  They’ve now picked up quite a few of the Aberdeen ones from March.
  - Nick_C says:
    
    18 Feb18 February 09:24
    
    Also apparently Newcastle to Brussels, Belgium, and Stavanger
    
    https://www.travelmole.com/news_feature.php?c=setreg&region=2&m_id=_rv_rY!b~A&w_id=35808&news_id=2036186
Jonny Price says:

19 Feb19 February 16:10

I can’t help but sense something a bit dodgy about the whole thing. If Flybmi was part of an airline group with Loganair, surely Loganair could have continued to subsidise it if they had wanted to (as they have done since the group was created)? Other airline groups subsidise loss making carriers with the profits of other airlines all the time. Did the management of the group actually want Flybmi to go bust?

Some interesting points…
– Flybmi / bmi regional has never made money since it was purchased from IAG in 2012
– It has a high cost base – expensive old aircraft, expensive staff on old former bmi contracts, niche regional routes with low load factors
– It would’ve been expensive to restructure/rebrand the company and/or formally merge it into Loganair. By “going bust”, they could suspend operations with no liabilities (no staff redundancy costs, no ticket refunds, no supplier costs etc.)
– Loganair has always been the more successful airline in the group – and they can make it even more successful by picking up the profitable parts of Flybmi’s network and getting hold of some of their aircraft cheaply from the administrators
– Now is a convenient time to go bust – they can blame it all on external factors, even if this has been their strategy for some time (admittedly the uncertainty surrounding Brexit doesn’t help a British airline which operates many routes within/between countries on the continent and whose UK network includes many routes to/from Brussels)

Events that make me believe this was deliberate..
– Flybmi have already transferred two Embraer ERJ-145s to Loganair
– Flybmi’s European-based aircraft were positioned back to the UK on Friday evening, before the announcement (and whilst tickets were still selling)
– Loganair announced they would pick up five of Flybmi’s routes (from Aberdeen and Newcastle) less than 24 hours after Flybmi’s announcement – and have since announced interest in the subsidised Derry to London rote
– They returned their business customers ‘home’ on the Friday before half term and went bust the following day on what would normally be a quiet week – giving time for Loganair to step in once business traffic picks up again after half term
- Rob says:
  
  19 Feb19 February 19:11
  
  Agreed, there is clearly some intra-group work here. However the administrators have a legal right to get the best possible price for the pieces. Also worth noting that, whilst Loganair is ‘picking up routes’, it is not taking over existing tickets. Anyone else can still open those routes. The Embraers would be leased so the lessor would be happy to release quickly.
  
  To be honest, who else would want in anyway? Not a lot of competition.
  
  The timing issue could be something to look at, if anyone thought the company was trading whilst insolvent, which is an offence.