Author Topic: FLYBE.L - Flybe  (Read 12191 times)

Laxputs

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FLYBE.L - Flybe
« on: August 16, 2016, 12:08:18 PM »
Flybe. LON:FLYB Regional UK/Europe airline.

Detailed write up here: http://quinzedix.blogspot.ca/2015/11/normal-0-false-false-false-en-us-x-none.html

Anyone a shareholder? Has anyone tried to breakdown the unit costs ex D&A, Fuel, Rent for the fleet excluding the E195 jets?  Pretty murky given the culling/adding of routes. And the parking/flying of some of the E195s.  And the restructuring/one-time costs, etc. But doing so is likely where the obscured value lies.

140m EBITDAR is straight forward. That's 120m plus the 20m drag from the E195s that are on their way out (2019). That in turn would lead to a 2.5x share price appreciation if the Brexit hysteria calms.

Thoughts?
« Last Edit: August 16, 2016, 01:08:48 PM by Parsad »


sampr01

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Re: FLYBE.L - Flybe
« Reply #1 on: August 16, 2016, 02:27:32 PM »
Hi Laxputs,

Did you check GWINVESTORS.COM. He has a right up and usually have updates in his letters too.

http://www.gwinvestors.com/research/public/

http://www.gwinvestors.com/blog/


muscleman

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Re: FLYBE.L - Flybe
« Reply #2 on: August 16, 2016, 03:20:07 PM »
Flybe. LON:FLYB Regional UK/Europe airline.

Detailed write up here: http://quinzedix.blogspot.ca/2015/11/normal-0-false-false-false-en-us-x-none.html

Anyone a shareholder? Has anyone tried to breakdown the unit costs ex D&A, Fuel, Rent for the fleet excluding the E195 jets?  Pretty murky given the culling/adding of routes. And the parking/flying of some of the E195s.  And the restructuring/one-time costs, etc. But doing so is likely where the obscured value lies.

140m EBITDAR is straight forward. That's 120m plus the 20m drag from the E195s that are on their way out (2019). That in turn would lead to a 2.5x share price appreciation if the Brexit hysteria calms.

Thoughts?

I never look at EBITDA for capex intensive industry. Not a good measure of underlying economics.


KJP

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Re: FLYBE.L - Flybe
« Reply #3 on: August 16, 2016, 03:22:36 PM »
Flybe. LON:FLYB Regional UK/Europe airline.

Detailed write up here: http://quinzedix.blogspot.ca/2015/11/normal-0-false-false-false-en-us-x-none.html

Anyone a shareholder? Has anyone tried to breakdown the unit costs ex D&A, Fuel, Rent for the fleet excluding the E195 jets?  Pretty murky given the culling/adding of routes. And the parking/flying of some of the E195s.  And the restructuring/one-time costs, etc. But doing so is likely where the obscured value lies.

140m EBITDAR is straight forward. That's 120m plus the 20m drag from the E195s that are on their way out (2019). That in turn would lead to a 2.5x share price appreciation if the Brexit hysteria calms.

Thoughts?

I'm a shareholder and have engaged Red in the comments section of that post.  Unfortunately, I don't have anything to add to the analysis/models of his that he has linked to in the comments and the discussion contained there. 

I'm skeptical of Greenwood's projections, because they appear to depend on profitable European (as opposed to intra-UK) growth.  What is the evidence that Flybe can effectively compete on those types of routes, versus the intra-UK routes in which they're the only (airborne at least) game in town?

KJP

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Re: FLYBE.L - Flybe
« Reply #4 on: August 16, 2016, 03:25:36 PM »

I never look at EBITDA for capex intensive industry. Not a good measure of underlying economics.

To be fair, the analysis in the blog post and accompanying comments focuses on how much cash the company will generate.  EBITDAR is used, I think, for relative valuation purposes.

Laxputs

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Re: FLYBE.L - Flybe
« Reply #5 on: August 16, 2016, 05:18:15 PM »

I never look at EBITDA for capex intensive industry. Not a good measure of underlying economics.

To be fair, the analysis in the blog post and accompanying comments focuses on how much cash the company will generate.  EBITDAR is used, I think, for relative valuation purposes.

Right, I too as a shareholder am hoping they focus on their core, their short-hop intra-UK flights and not the intra-Europe connections. But Saad has stated he is targeting a 40%-50% mix so we will likely see funds spent trying to establish routes outside the U.K. Their rationale is that they have a more optimal fleet, the Q400's than the fleet of the larger competitors. I have no opinion either way if he is right. I'm just sure it will cost money to find out.

I too prefer FCF over EBITDAR. The market will likely value Flybe on a 4.5x-6.5x multiple of EBITDAR so it is worth looking at that too. But, yeah, in the end, it's all about cash made and more importantly cash returned to shareholders.

The way to analyze Flybe is to breakdown the unit costs of the Q400/other operating costs, and then the yield and LF of their core routes.  Then giving a range of LFs and the addition/run rate of the new routes. I'm just finding that very tricky to do given how much noise there is with the changing fleet and restructuring (and as usual marvel at Red Corner's work). 

ukvalueinvestment

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Re: FLYBE.L - Flybe
« Reply #6 on: August 17, 2016, 12:24:43 AM »
I am sceptical about this idea that a fleet of Q-400s is some sort of competitive advantage if it has better unit economics.  If so, surely another airline can buy a bunch in the medium term and there goes that advantage.  That said, the stock is cheap on metrics, seems to have a good incentived owner, it's a beaten up uk stock post brexit and there's oil hedges rolling off. 
@ukvalueinv

KJP

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Re: FLYBE.L - Flybe
« Reply #7 on: August 17, 2016, 06:25:36 AM »
I am sceptical about this idea that a fleet of Q-400s is some sort of competitive advantage if it has better unit economics.  If so, surely another airline can buy a bunch in the medium term and there goes that advantage.  That said, the stock is cheap on metrics, seems to have a good incentived owner, it's a beaten up uk stock post brexit and there's oil hedges rolling off.

I don't think they need the Q-400s to be a "competitive advantage" on the domestic routes.  Rather, the "competitive advantage" is that most of the domestic routes don't have the volume to support additional flights, so the company faces no competition from other airlines.  Instead, it competes with ground transportation.  The Q-400s are important because they're much lower cost to fly, so they can actually make a profit on these routes.

The European routes are a different matter.

ebdem

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Re: FLYBE.L - Flybe
« Reply #8 on: June 08, 2017, 09:03:11 AM »
Hey there, I like to bring the topic back on the table. Share price dropped to all time lows: http://www.flybe.com/corporate/investors/share-price-charting.html
Terror in Britian was one cause - i think.
The numbers from 31.03.2016 till 31.03.2017 are out: http://otp.investis.com/clients/uk/flybe1/rns/regulatory-story.aspx?cid=59&newsid=880817.

They changed their strategy to a more customer focussed business:
Quote
Flybe reached its peak fleet size of 85 in May 2017. Reduction in the fleet size will start by returning six end-of-lease Q400s in 2017/18. This will enable Flybe to become a more customer centric business and for the first time concentrate the business on profitable routes. Becoming a truly demand and customer-focused business is the key plank of our strategy.

Implementing a clear strategy is about returning to the core of what really works for the airline. We will make Flybe a sustainable business that operates the best routes and at the best times to suit the needs of our customers. We will stay true to our mission to connect people and businesses with safe, reliable and affordable travel./quote]

Any thoughts?

Fly

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Re: FLYBE.L - Flybe
« Reply #9 on: June 08, 2017, 05:11:01 PM »

Sounds like antiquated IT systems are bogging down the company (among other issues):

https://www.thetimes.co.uk/article/new-plan-for-flybe-as-airline-posts-annual-loss-jf9whq0s3

I'm not so sure I would want to jump in until a new IT system was implemented. Lots of old IT systems can't handle new ancillary charges airlines push to customers. And with such low load factors it sounds like poor fare management.

Additionally, "shrink to profitability" rarely works in the airlines since broad reductions result in laying off the most junior (cheapest) employees leaving the more expensive employees which drives up unit costs, which causes more reductions, etc etc. Additionally, their old E195s will need to be replaced in the next 3-5yrs (either new E2s or CSeries, big $$$).

Today airlines are generally doing really really well, so for Flybe to be struggling so much is not a good sign. Maybe take a look at RYAAY or ESYJY for better performing Euro LCCs.
« Last Edit: June 08, 2017, 05:14:18 PM by Fly »