FlyBe, Embraer and High Speed Rail

At the recent Farnborough Air Show, FlyBe, the UK regional carrier announced an order for 35 Embraer 175 aircraft, with options and purchase rights which could see up to 140 of these 88-seat aircraft delivered.  Subject to the normal retirements and fleet rotation, these will join FlyBe’s existing fleet of 14 118-seat Embraer 195s and 58 (plus 8 on order) smaller Bombardier Q400s.

FlyBe stated that these aircraft would support planned European growth, which others have interpreted as meaning a reduction in service to the UK market.  It has even been suggested that the new UK government’s commitment to high speed rail is driving FlyBe from its home market.

This is utter nonsense. It is, in fact, the infatuation with high-speed rail, of one form or another, which has driven FlyBe’s growth in the UK and it is this model which the company plans to export to Europe.

High-speed rail is enormously capital intensive, with huge fixed assets which can only be fully exploited on the busiest of transport corridors.  Thus, we see high-speed networks radiating form Paris and Madrid to provincial cities; linking the northern-European capitals via Eurostar and Thalys; and weaving through coastal Japan’s economic hubs.  North of London, there may not be true high-speed rail, but frequency is almost as important as speed over shorter distances, and 200Km/h trains serve London from Manchester and Birmingham every twenty minutes, with half-hourly service to Leeds and other important cities.  A future high-speed rail network might provide extra capacity on these corridors and may, eventually, stretch as far as Edinburgh or Glasgow.

Experience shows us that the construction of high-speed rail has many consequences, but two are of particular note to FlyBe.  First of all, it increases customer expectation – passengers become accustomed to shorter journeys and convenient, frequent, departures.  Secondly, particularly in Europe and especially in the current fiscal climate, it drains resources from the rest of the network.  Non-TGV long-distance trains in France are slowly dying on the vine.  In the UK, a desire to trim a few pennies from the exploding rail budget saw cross-country services dramatically pruned at the last franchise renewal.

To put this in the context of FlyBe, we can see that, while the principal fast rail routes in the UK are great for those visiting London, other axis are poorly served – particularly those between the north-east and south-west.  No rational or affordable expansion of high-speed rail in the UK will serve these markets, so travelers venturing between regional business centres, such a Edinburgh and Southampton, will continue to be a captive market.  Even leisure traffic to the South is being forced onto FlyBe’s Bombardier’s by the rationalisation of the cross-country network – nobody wants to put their elderly mother onto a train in Edinburgh knowing that she’ll have to heave her luggage between trains in the Stygian labyrinth that is Birmingham New Street.

High-speed rail might, though not as surely as politicians claim, impact domestic flights from London – this is more a worry for those plying routes to Edinburgh and Glasgow, travel to Manchester and the north-west is already dominated by rail.  FlyBe’s services from Gatwick to Inverness and Aberdeen will continue – even if a train reaches Edinburgh in 150 minutes, passenger for Inverness will spend another three and a half hours pootling north, probably changing trains in the process; recall my earlier point about rising expectations.  Even flights to Newcastle and Leeds might remain viable if travellers from small financial hubs like, Redhill and Brighton, can’t be persuaded to head into London and take a tube to a high-speed terminal at Euston.

In short, the trends favoring FlyBe will not be affected by any proposed rail policy.  As FlyBe continues to build market share and awareness on it’s UK routes, it will replace Q400s with the larger Embraer 175s and start building new markets in Europe.  In terms of land mass, both Spain and France are far larger than the UK, with scattered cities which can never be quickly connected by rail.  FlyBe knows this and should be able to export its business model.  Liner Italy is, like Japan, more suited to rail but Germany, with no one dominant city, should also provide the airline with rich pickings.

I suspect that some, concerned about emissions of carbon dioxide, will bemoan this state of affairs.  This seems misplaced anger – I can’t imagine that, on the basis of actual passenger-kilometers, a heavily-loaded Q400 creates more emissions than two diesel locomotives slowly propelling nine carriages between Edinburgh and Inverness with only a handful of customers in each.  It might be considered cruel to request that Bombardier provide comparable data for its aircraft and the heavy, thirsty, Voyager trains it supplied for the UK’s cross-country network.

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