Patrick Fennell, COO Xfly, chats crisis management & more given Covid-19
“The truly global nature of the coronavirus has really surprised us,” Patrick Fennell, COO Xfly, told anna.aero. “There is no playbook for navigating your way through it,” which highlights the difficulty of knowing that a black swan event will happen, but without knowing when or to what degree it will impact your business.
LOT and SAS key for Xfly
Founded by Nordica in 2015, the Estonian-headquartered Xfly recently rebranded from Regional Jet. It focuses on capacity purchase agreement (CPA) flying. “We are one of Europe’s youngest but fastest-growing CPA airlines, providing regional capacity on long-term wet-lease agreements to mainline carriers in Europe. We have two long-term partners, LOT Polish and SAS, plus a number of others that we work with on a shorter-term basis.” In 2019, so pre-coronavirus, Xfly had around 2.5 million seats in total, OAG Schedules Analyser shows, with its route map last year below.
Covid-19 impacts on Xfly’s core customers
“As a CPA provider, we are very much dependent on our partner airlines and how the virus is affecting them. At LOT Polish, where we operated a number of CRJ-900s, there has been a suspension of all flying, so we are not providing any capacity there at the moment.” In 2019, around 52% of Xfly’s total seats were on behalf of LOT Polish.
SAS, meanwhile, had around 40% of its total capacity. “At SAS, capacity has dropped to around 15-20% and is limited to ATR-72 operations. All CRJ operations are suspended until further notice, although we have been operating some charter flights, mainly to repatriate Estonians who have been stuck in other countries after regular scheduled services ceased.”
Every cost reduced to protect cashflow as creativity soars
Like all operators, the impact of Covid-19 on Xfly has been significant, and tough times call for tough measures. “We have been reducing every cost we possibly can protect our cashflow. We’ve had to get seriously creative,” said Fennell. Of course, a lot of things are confidential, but the significance of its approach resonates with everyone.
“To stem cashflow, we had to go to each and every vendor and supplier, including lessors, and determine who was critical to pay in order to keep the business running, and who would need to wait until we got back on our feet. We didn’t like doing it, especially as we know many other airlines would be doing the same.”
Bringing outsourcing back in-house
Labour is, of course, a large expense for airlines. “We’ve reviewed labour laws and emerging support packages in each of the countries we operate in order to determine what our salary liabilities would be, and then we then apply those state benefits in the optimum way possible by adjusting our employees’ workloads to the dramatic drop in business.”
Very interestingly, and perhaps something that goes undiscussed during a crisis, is in-house working versus outsourcing. “We also found that some of our activities that had been outsourced could now be brought back in-house as the reduced scale of operating made it more economical to do so.”
|Xfly’s top-10 routes (for others) in 2019||Total seats||Xfly’s top-10 airports (for others) in 2019||Total seats|
|Tallinn – Warsaw||194,655||Copenhagen||772,698|
|Aarhus – Copenhagen||177,940||Warsaw||713,118|
|Stockholm – Warsaw||151,537||Stockholm Arlanda||592,000|
|Billund – Copenhagen||150,360||Tallinn||556,000|
|Riga – Warsaw||129,138||Billund||272,000|
|Vilnius – Warsaw||122,984||Vilnius||179,118|
|Copenhagen – Gothenburg||111,410||Aarhus (Denmark)||178,220|
|Stockholm – Tallinn||97,020||Arvidsjaur (Sweden)||161,940|
|Aalborg – Copenhagen||93,520||Gallivare (Sweden)||155,920|
|Copenhagen – Hannover||88,620||Riga||129,138|
|Source: OAG Schedules Analyser.|
Black swan events are inevitable but don’t be helpless and reactive
Black swan events are, by their very nature, unpredictable and potentially devastating for airlines and all who rely on them. But it is predictable that they will happen – just not when or the specifics of them. Therefore, a highly proactive approach is needed, with Fennell insisting that “airlines don’t have to be completely helpless and reactive when they occur.”
“Making scenario planning a part of your airline’s business continuity management plan can help you get a head start on many of the potential occurrences, even when you don’t know what they are. In the case of the COVID-19 crisis, any airline that had practiced working remotely with their staff would have had a head-start on the disruptive impact of social distancing measures. From a financial perspective, having an intimate knowledge of your business, its main cost drivers, and what it can live without while maintaining a safe, quality, and compliant operation would also have helped.”
Needless to say, a war chest of funds will help to shield your business through most events so that you are still standing once it’s over. And it will be over, which then raises the questions: how do you best respond to it and benefit from it?
Patrick Fennell is COO and Accountable Manager at Xfly. See him here.