Bmi Regional’s CEO talks to Paul Revel about feeding long-haul travel, bespoke routes and the impact of the collapse in oil prices
Peter Simpson has spent more than 30 years in the airline industry. He took up his latest role, as CEO of Bmi Regional, in March 2015. The airline became an independent carrier in 2012, when the main part of Bmi was integrated into British Airways. At the time, he was managing director of Bmi Group, so he led that process.
Simpson is based at the airline’s HQ at East Midlands airport. Of its six UK airports, the biggest hub is Bristol, serving seven routes. Bmi Regional recently announced a new Southampton-Munich route, starting in April.
This is part of the airline’s move to make Munich its intra-European hub. “Other routes we’ve announced out of Munich are Bergamo in Italy, Rostock in northern Germany and Norrkoping in south east Sweden.” These flights added to Bern, Brno, Rotterdam and Bristol bring a total of eight destinations from Munich.
“These will be alongside our Lufthansa codeshare, which is where we’ve seen the value both for ourselves and for them,” says Simpson. “So we are continuing to feed long-haul travel out of destinations that they find difficult making work with their size of aircraft. And ours seem to be uniquely placed to fill those gaps.”
This strategy of expanding on codeshare routes, while at the same time feeding partners’ long-haul flights “has been working extremely well”.
Another key element of Bmi Regional’s strategy is focusing on business travel by targeting particular routes. “For us and the kind of aircraft we fly, which is the Embraer, typically a 50-seat jet, the focus is on business travel, our core element,” he says. “So you’re looking to put in place schedules and destinations that work for the corporate client.
“There have been interesting changes over time. Working more closely with corporate customers, we’ve actually been able to identify specific routes shaped around their needs.” Other route demands have come to the airline’s attention via travel management companies, he adds.
This ‘bespoke’ level of service is at the top of what Simpson describes as four tiers – the lowest being purely price-based, rising to added levels of flexibility, then benefits such as fast-track and lounge.
A need for consolidation?
Last year BBT reported on Lufthansa CEO Carsten Spohr’s view on the EU market being overpopulated with airlines, and the need for consolidation.
What’s Simpson’s view on this? He agrees there is a “significant number” of low-cost operators and asks: “Is that sustainable relative to the market size? And the answer to that is, probably not. There is likely to be consolidation.” But he adds: “From my own perspective, that’s not the market we play in.”
So what is Bmi Regional’s niche that separates it from the likes of Ryanair and Easyjet? Smaller aircraft providing point-to-point destinations for core business travellers on routes that would otherwise not be served, says Simpson.
This, in turn, can benefit the route destinations, he believes. “It actually enhances the ability within regions to drive increased GDP, because you get inward flow as well as outwards. Bristol-Milan being an example, which wholly started for a corporate customer but the passenger volumes then driving inward investment into the Bristol area. It works both ways, and
we are seeing that on our intra-European services.”
What’s his take on partner Lufthansa’s controversial GDS fee, introduced last year? “The argument [over distribution costs] has been going on forever, and I think there’s a clear recognition that the charges – particularly to the legacy airlines – that are levied by the GDSs are so out of proportion relative to the service provided and the margins that are made. Lufthansa has taken a brave step to try and break that stranglehold.”
Oil and gas
Collapse in oil prices has seen many airlines return to profit for the first time in years. But what is the impact on traffic at Bmi Regional’s Aberdeen hub, where the core industry is oil and gas? Simpson says the implications go far beyond Aberdeen.
“I think the low oil price is a double-edged sword for a much wider community than just airline travel. The impact is much broader. I don’t believe this sudden reduction in oil price has been helpful for UK, European and worldwide GDPs.”
Like many airline bosses, Simpson despairs of lack of progress on south-east airport expansion. “I think the biggest frustration for everybody is government inaction on this, whether you’re in the Heathrow camp or the Gatwick camp.
He adds: “It’s bordering on criminal the amount of time the UK government’s taking to drive forward on something they know is required for UK plc.”
The airline industry has many challenges, but one thing it’s not is dull, according to Simpson – who didn’t plan to be in it so long. “I suspect I’m no different to a number of people who start something and think: ‘I’m only going to do this for a short period of time’ – and suddenly you look at the dates and say: ‘Really, it’s 30 years later?’ I think it is a genuinely exciting industry. Once it grabs you, it’s dynamic and ever-changing, and that keeps you forever interested.”
Peter Simpson was appointed as CEO of Bmi Regional in March 2015. He was previously British Airways’ Gatwick director for two years. He joined Manx Airlines as financial controller in 1985, and has since served as finance director for BA Connect, managing director at BA Cityflyer and then managing director for Bmi.