IF there is one thing Peter Simpson can’t tolerate, it’s complacency. BMI Regional, the smaller of two operations he is responsible for as chief executive of Airline Investments Limited (AIL), stands on the cusp of reporting its first profit in many a year, but Simpson insists there is “always more to do”.
Interestingly, this will include a partial move away from the small and friendly Embraer jets which have underpinned the carrier’s recovery since it turned independent in 2012.
It’s by no means a rejection of the strategy instigated by Stephen and Peter Bond, the brothers who previously owned global helicopter operator Bond Aviation. They bought loss-making BMI Regional four years ago to run alongside Scottish-based Loganair, but the two carriers have very distinct business models that preclude a total merger.
Loganair operates craft under franchise to Flybe, which services many of Scotland’s remote and island communities. BMI Regional is rebuilding its success as a business-friendly carrier running flights from smaller airports throughout the UK to business capitals such as Milan, Oslo and Paris, as well as intra-Continental services between the likes of Bremen and Toulouse or Munich to Rostock.
The financial success of this has hinged upon a strategic retreat from over-serviced markets – which led BMI Regional to quit Edinburgh in 2013 – and the fact that it keeps load factors high, with planes seating a maximum of either 37 or 49 passengers.
But things are always evolving in the dynamic aviation market. Simpson says demand on some routes, such as Bristol to Germany, is such that slightly larger aircraft seating 70 to 100 will soon be necessary.
“We would hope to begin introducing some of those within the next 12 to 18 months,” he adds.
Somewhat ironically, we are in Glasgow discussing the future of BMI Regional, which has been headquartered out of the East Midlands since last year’s decision to shift administrative functions out of Aberdeen.
Simpson is here because of Loganair’s base at nearby Glasgow Airport, where he has been working for three days a week since the end of April. He’s been forced to increase his monthly visits north to oversee operations at Loganair, which is awaiting the arrival of its new managing director, Jonathan Hinkles, from Virgin Atlantic at the end of this month.
Hinkles will report to Simpson, who has overall responsibility for AIL while also running BMI Regional. He says the decision to consolidate the latter’s administrative functions away from Aberdeen was a logical step in the regional airline’s on-going evolution.
“A lot of work had already been done when I joined in March of last year, but equally there were things that had not gone through and not been dealt with,” Simpson explains. “One, for example, was we effectively had two head offices, one in Aberdeen and one in Bristol.
“Even before I started, Stephen had aspirations to drive further synergies between Loganair and Regional, and that was one of the things that excited me about the job.”
While that will not entail a full-blown merger, as a qualified accountant Simpson sees other opportunities such as the combined group’s buying power to negotiate better prices on equipment and other purchases. The two are also making better use of their shared resources, such as BMI’s former regional hangar at Aberdeen Airport.
As part of the move to consolidate headquarters, BMI Regional also switched engineering facilities from Aberdeen to Bristol. This led to headlines highlighting 80 jobs at risk, though Simpson is quick to point out that 40 people still work at the hangar carrying out maintenance on Loganair craft, with suggestions that the facility could be used even “more effectively”.
Simpson came into the job fully aware of what lay before him, having led the sale of the airline to the Bonds in his previous role as head of BMI Group.
Born and raised on the Isle of Man, his first “proper” job after delivering newspapers came at the age of 17 working for a local travel agency. From there he soon joined the finance team at Manx Airlines, a joint venture founded by British Midland and AirUK in 1982. Simpson worked his way through Isle of Man College and his accountancy qualifications while at Manx, where he eventually became finance director. He would go on to hold similar roles with British Regional Air Lines and BA Connect before making the jump from finance in 2007 to become managing director of BA CityFlyer, the regional subsidiary of British Airways.
He spent an “intense” nine months in 2012 as managing director of the former British Midlands International group, which was being absorbed by BA’s parent company, International Airlines Group (IAG). IAG kept British Midland’s Heathrow operations, closed down low-cost carrier BMI Baby, and sold off BMI Regional, all under Simpson’s stewardship.
He then accepted the offer to head up British Airways’ operations at Gatwick, where he worked for two years before his reunion with BMI Regional.
In numerical terms, the regional business is the junior partner within AIL, accounting for roughly £80 million of the combined turnover of £200m. It has 400 employees versus roughly 600 at Loganair, and 18 of the combined fleet’s 46 aircraft.
But there are big ambitions within the airline, which currently operates more than 300 scheduled flights per week across a network of 25 destinations in ten European countries. Its continental hub in Munich now serves a total of eight destinations, which help feed passengers into the long-haul flights of codeshare partners Lufthansa and Brussels Airlines.
Europe accounts for about 40 per cent of BMI Regional’s turnover, and the collaboration with Lufthansa is said to be working “extremely well”, so on the question of Brexit it comes as no surprise that Simpson supports a “stay” vote. “From a business perspective, we believe it is right and appropriate that the UK remains aligned to the EU,” he says. “There are so many unknowns, and the airline industry is the same.”
These include the future of traffic rights that allow members to operate flights anywhere within the European Common Aviation Area (ECAA) without restrictions on capacity, frequency or pricing.
Britain’s place in the open skies agreement between the EU and US could also be at risk.
“As it is with most of the issues around Brexit, there are more questions than answers,” Simpson says. “The current situation is not perfect, but personally I would rather be inside and be able to influence decisions, rather than be told that if you want to fly through Europe, this is what you must do.”
A further 40 per cent of BMI Regional’s revenues are derived from domestic routes across the UK, which in Scotland include connections from Aberdeen to Norwich and Bristol. Numbers on these flights, as well as services from Aberdeen to Oslo and Esbjerg, have been impacted much as the rest of the industry by the downturn in the oil and gas sector.
Simpson doesn’t quite rule out the possibility of BMI Regional services out of Edinburgh or Glasgow at some point in the future, quoting the “never say never” dictum. Should rivals with larger planes prove unable to profitably operate a particular route, the opportunities will be examined.
But the two cities are generally well-served by both mainstream and low-cost carriers. Unless BMI Regional can set itself apart, there’s no point in trying to slug it out in a saturated market. “We can operate successfully alongside a low-cost carrier, but it depends on the circumstances,” Simpson says. “For us that typically comes down to being geared around the business schedule.”
From Bristol, for example, BMI Regional has daily flights mornings and evenings to Charles de Gaulle which are attractive to its core business market. The same route served by EasyJet leaves at midday, and tends to have more leisure travellers.
“The real danger is that without regional flying, everything gets centralised,” he adds. “The point-to-point connections that we offer allows businesses outside of London to thrive.”
Born: 1967, Isle of Man.
Education: Isle of Man College.
Ambition at school: To travel. Being from a place such as the Isle of Man, which is only 33 miles long and about 13 miles wide, does drive an ambition to see the world.
First job: Paper round.
Can’t live without: My iPhone.
Kindle or book: Definitely a book. Same as newspapers – I have to have a hard copy.
Favourite getaway: Oslo and Berlin – I enjoy the European cities.
Preferred mode of transport: If I could I would cycle everywhere. The reality is that you fly.
What car do you drive: An Audi.
What makes you angry: Complacency.
What inspires you: Businesses that have demonstrated continual improvement. That is a very difficult thing to achieve.
Best thing about your job: The pure variety of what I deal with on a day-to-day basis.