Andrew Pyne, Founder and CEO of Fly Atlantic
On Wednesday, May 3rd, I had the privilege to interview Andrew Pyne, founder and CEO of Fly Atlantic. He has more than 30 years of experience in the aviation industry working for 13 different airlines including British Airways, Cathay Pacific, WOW Air, Cobalt Air, and Viva Air Macau. Prevosily, Mr. Pyne served as CEO of Viva Air Macau from 2004-2007, and CEO of Cobalt Air from 2015-2016. This interview has been edited for length and clarity.
Joshua Kupietzky: What is your background in the aviation industry?
Andrew Pyne: I have been in aviation for about 30 years. I started with British Airways. Then, after working in London with British Airways, I moved to Asia to work for Cathay Pacific in Hong Kong. In 2004, I decided to get into low cost airlines. From that point on, my experience has been working for a variety of low cost airlines. To sum it up, I have worked for 13 different airlines in 12 countries, including in Asia, Europe, Russia, and the Middle East among other regions.
JK: Why did you make the switch from working at business oriented carriers, such as British Airways and Cathay Pacific, to the low-cost sector?
AP: My first job in the airline industry was with British Airways, and that was really a learning experience. I was new to the business, so I was doing a lot of airport jobs during which I was getting a great education in aviation. With Cathay Pacific, I was working much more on government affairs and building alliances as well as corporate commercial cooperation. I had seven years of doing that work, and it became a little bit boring and repetitive because I was basically doing the same stuff every day, every week, every month. And so, I wanted to branch out and get back to the basics and set up an airline myself. In 2004, it seemed pretty obvious that the low cost sector was where things were happening and where new models of business were being developed. I was based in Hong Kong, and it seemed to me that the low cost revolution which swept through Europe and North America was about to break over Asia. I wanted to be in on the first wave of that. So in 2004, I left Cathay Pacific, and I took my savings and set up an airline in Macau called the Viva Macau. Macau, being only 30 miles away from Hong Kong, was under the same kind of jurisdiction and the same kind of region, but it offered a cheaper alternative to Hong Kong in terms of operating costs. That was my first experience in the low cost sector and my first experience as somebody founding an airline from scratch. It was also my first CEO role in the airline industry. I worked at Viva Macau from 2004 until 2007 during which I got the airline funded and in the air. For about six to nine months of operations, the airline was in good shape, so I sold my stake in it and moved to Russia where I set up the first low cost airline in Russia.
JK: Fly Atlantic’s business model replicates WOW’s long-haul network. What lessons have you learned from WOW Air and how is Fly Atlantic different from WOW? Why will Fly Atlantic succeed where WOW Air failed?
AP: Fly Atlantic is not a replica, but it certainly replicates some of the features of WOW Air. Another point to pick up on is WOW failing. It did ultimately fail, of course, but it was also profitable at times during its existence, and it certainly proved to me that the model could be profitable. I was at WOW for about a year as a board advisor. I knew that the basic model was good, strong, and could be made successful. There were a number of factors that undermined the model in Iceland. WOW had three main issues, and the biggest one was the cost to be based in Iceland. Iceland is an expensive place to live and certainly an expensive place to base an airline. Secondly, we had a very big fleet of aircraft. I think we had four different variants of the Airbus: the A319s, A320s, A321s, and A330s, which amounted to 26 aircraft in total. That mix of different aircraft types made life difficult operationally. Finally, I think there was uncertainty about the direction of the airline. The A330s came in and were big aircraft. They had more than 300 seats, but there wasn’t really a clear plan as to how to utilize them. The airline had six very large aircrafts, and it had to find ways in which to make business sense out of it. It's always the wrong way around. You first need to find a business requirement, and then you find the aircraft. You do not do it the other way around. Those three factors played into the final collapse of WOW.
In terms of why Fly Atlantic will be different, I think we have to take in the basic idea, which is to have an intermediate hub linking Europe and North America. We have taken that basic idea, but looking at the factors I mentioned, we have a much lower cost base in Belfast, Northern Ireland. We have an excellent deal with the airport there in Belfast that will certainly ensure that we have much lower airport costs than WOW was contending with in Keflavík Airport [Iceland]. We have not made the aircraft selection yet, but we will certainly go for a single aircraft type. Finally, we are certainly not contemplating going into wide bodied operations or anything like the Airbus A330, Boeing 787, or Boeing 777. We have a very clear idea about how our route network should develop over the next five, seven, and ten years. I understand it's a very competitive environment, and it’s tough to make money there, but I think the way our business is structured, the elements I've described really help inoculate us from some of the competitive challenges. Another big factor is how we deal with a winter season when numbers really fall, and everybody struggles on North Atlantic routes in November, January and February. During these months, we have a plan to utilize our aircraft going into the Caribbean and Bermuda, which is quite a different model from the model that was used by WOW and is currently used by PLAY, Norse [Atlantic], and other transatlantic airlines.
JK: What is the ethos behind Fly Atlantic, and what segment of travelers will you be targeting: VFR, leisure, or business?
AP: I suppose all of them. However, there will certainly be a segmented product offering. We will be having a small premium cabin in the front of the aircraft. This is unusual for low cost airlines. The ethos is really to provide value for money, which sounds a bit simplistic and cliché, but I think the core to this is pricing - getting it right. Pricing alone does not deliver if operations are unreliable, the airport experience is a shoddy one, or if people are losing their bags and are missing connections. The other big lesson that grew out of WOW, which had its own operational problems, is that it is necessary to get the airport experience right. We have to make the airline operationally reliable, and we have to deal with those factors, as well as deliver a decent level of service to our customers, before we can hope to attract the volumes, which will make this airline profitable. Price is a key factor, and we have got to get our pricing down to the point where we are below virtually everybody else on the routes we are serving. Pricing plus service reliability are critical. If an airline has pricing without service and reliability, travelers will not choose that airline. Frankly they will take the direct flight option.
JK: How did Belfast stand out to you as the one to select out of the 10-12 airports, especially when we have seen long-haul carriers pull out of the airport in the past couple of years?
AP: Long haul carriers did pull out of Belfast in the past, and it had a lot to do with the type of product they were offering, with large aircraft that were too big for the market, or they were operating purely on a point-to-point basis without feeder services. The key to our success will be linking a strong feeder network into the hub. We are not just focusing on Northern Ireland and North America, but we're focusing on Europe and North America. That is a critical difference. There were a lot of reasons we chose Belfast. We looked at 12 different airports across the British Isles and in Ireland. Belfast scored top for a number of reasons. For instance, there is a lack of competition there. There aren't people flying transatlantic from Belfast at the moment. It also has good infrastructure - a long runway - which is the most basic requirement. If we can't fly out of the airport, then we scrub it, and a long runway is a critical factor. There is also a lack of congestion so that we have the time to accommodate delays and build a strong reliable connection model. Lastly, the other critical factor about Belfast, is the pricing deal offered by the airport that's commercially confidential, but it was just too good to refuse. It was an extremely good deal, and we'd be lucky to find that anywhere else in the world. These factors played into choosing Belfast, and I think our decision has been vindicated because we have had great support from the local government and the local public there. It is quite a big catchment area. The population of Northern Ireland is six times the population of Iceland, which is an interesting metric when we compare the likes of WOW and Play with what we will be doing in Belfast. We can also access the entire Irish market from the south as well as the north, and we get to build a strong feeder network from the rest of the United Kingdom into Belfast.
JK: Fly Atlantic will either use the Boeing 737 MAX or Airbus A321neo. Have you made a decision about which aircraft you are going to use?
AP: Practically speaking, our fleet has to be a single aircraft type in one configuration rather than mixing different configurations, with one aircraft having 180 seats and another having 210 seats. That means we're using the same aircraft to fly, say Newcastle to Belfast, as we utilize for flying Belfast to Boston or Belfast to Chicago. We have not made a decision yet. We are talking with both Boeing and Airbus on a very frequent basis, and we are clear about the availability and the pricing of those aircraft. We are also talking to all the major leasing companies about their availability of the two aircraft types, but we haven't made a decision on which one, and partly that is to retain flexibility as we get closer to the launch. We will look at the market at that moment and make our decision. Each aircraft has strong points and weak points. However, overall, they are similar aircraft in terms of their unit costs, and they can both do the mission for us very capably. So, it's a decision we're keeping open for a little while longer.
JK: Do you know what destinations you are planning on serving in the United States? Will you be looking for large market destinations in North America?
AP: We do know which destinations we will serve. However, I find it difficult to share those today because of the need to keep some things confidential. In terms of North America, I do not think any of our choices will be a big surprise because, looking at what the aircraft can do in terms of its maximum range and looking where traffic is, you could probably give me ten cities straight off the bat. They would probably be cities that we will have to serve sooner or later. I think it's probably more interesting to look at Europe and where we're going to go for our feed because decision making for Europe is much more difficult. Every month, the picture changes as we see how our competitors are rolling out their networks. Obviously, we would ideally like to avoid head to head competition. We want to be quite canny about how we set up a European network. There are still many decisions to be made in terms of where we fly in Europe to feed the transatlantic flights. We have a short list of about 70 cities that we're considering in Europe that are secondary cities with substantial traffic volumes between those cities and North America, but most importantly, no direct services. One example is Bologna, although do not read too much into it. Bologna, Italy is certainly one of those places we're looking at very seriously, but it doesn't have direct service to the United States. If someone is flying out of Bologna, and although there is a substantial volume of traffic to North America, travelers still need to transit through Rome or Frankfurt or Paris or London. That sounds like a classic target market where we would like to be. At the end of five years, we would like to be serving sixteen cities in the United States and Canada and probably twenty cities in Europe. However, a quarter of those cities would be UK cities. They would be places in the UK like Newcastle, or indeed London, where we do want to have a presence, even though there's a lot of competition. And the other cities will be on the continent of Europe or possibly even in the Middle East.
JK: How do you view the main changes that have come about in the aviation sector because of the pandemic? For example, a lot of flyers think about change fees. Many airlines in the US have waived them. As a startup carrier do you plan to implement change fees?
AP: We have a variety of products. The deal there would be if travelers are flying in the front of the aircraft, they have a bundled offering that includes a better seat and change fees, and baggage fees would be waived. In the middle of an aircraft, for more legroom, passengers might also be waiving change fees. However, in the back of the aircraft, passengers would probably pay fees, but they will also be getting a very low base fare. Our approach is to customize the fare offerings to the maximum extent possible rather than make a general commitment to waive change fees or, indeed, to keep change. There will, of course, be a big emphasis on ancillary revenues as all low cost airlines have. We want to be a market leader in that regard. We have looked very carefully at some of the examples in the United States such as Spirit and Frontier. We look closely at what they are doing and how we might emulate that in the international environment. Ancillary revenues will be a big part of the airlines.
JK: As airlines emerged from the pandemic there was a shift towards more alliances and partnerships. Would you join one of these alliances completely, or do you prefer to have a foot in each of them?
AP: Codeshare agreements are often complicated. I spent most of my time at Cathay Pacific working through codeshare agreements. Some would take three to four years to negotiate. Not only are they complicated, but they also involve a lot of expenditure in terms of systems integration. We will probably try to avoid full fledged code shares, but, we are certainly pursuing commercial cooperation in a looser sense. We are actively pursuing it now, intently and aggressively, and we will certainly do that more as we approach launch. We want partnerships with our carriers serving Belfast, and the obvious candidates would be Ryanair and easyJet. We certainly want partners in the United States and Canada, although we have not been active in making approaches in that area. We have also been talking to Lakeland Airways, another UK regional carrier, about effectively converting Lakeland into an ATR feeder for Fly Atlantic. It is similar to what Emerald Airways does for Aer Lingus. To add to that list, we are looking at corporations with a Bermuadian carrier.
JK: Do you expect you’ll have more low cost competitors flying trans-Atlantic soon? And which global airline from a competitive standpoint has, or still does, concern you most?
AP: Aer Lingus is right on our doorstep, and though it is more of a hybrid airline, it has good costs. I'm very confident in our own capabilities, but I am also wary about the competitive response and about who Fly Atlantic is up against. Looking specifically at costs before COVID, there was a trend of low cost airlines taking a bigger share of the transatlantic market. Just before COVID began, low cost market share had gone up to around the 10% level. We are still well below that. The market consists of Norse and Play. I expected them to continue to develop and grow. Their business models are different in many respects to Fly Atlantic. JetBlue certainly has a presence now on this side of the Atlantic, and I'd expect that they develop their network more so. I think there will be more coming in, and ironically of course, if we succeed, that will encourage other people to jump into the market behind us. If low cost airlines fail, that puts off others from trying the same model. I like to believe that we're going to succeed and that others will seek to emulate us. I see the low cost sector becoming more and more significant on the North Atlantic. I don't think it is necessarily going to accrue to other long-haul markets because the North Atlantic market is unique. It has the size and the scale to accommodate a large number of airlines and can be served by narrow body aircraft today. The North Atlantic will be unique in supporting a number of low cost airlines, some of which will be more successful than others. I see a lot more competition coming in behind Fly Atlantic.
JK: The United Kingdom is currently in a financial recession and is expected to be in the same position for the next two years. I am wondering whether that is a concern for you, especially in the start-up process of Fly Atlantic?
AP: I do not think we will be operating until the UK comes out of recession. The attractiveness of the UK/US market is that it is a market of 22 billion people. Looking at Ireland separate from the UK in terms of air traffic, there were over five million US travelers to Ireland in the last pre-pandemic year. Putting together those numbers, it is a huge market already, but it is also a huge market for Fly Atlantic. It's far bigger than any of the other European/North America markets, and Fly Atlantic needs to be where the action is. Play, JetBlue, and Norse have been very prominent in the UK market, even though they're not based in the UK. Fly Atlantic has the advantage of being based in the UK and also of being right in the middle of the market and able to access that to a better extent. I'm bullish about the UK's prospects in the medium to long term, but certainly it's a particularly tough period at the moment. As we operate, I believe the UK will be coming out of recession; however, recession or not, there is still going to be an awful lot of people who are going to be traveling between Europe and North America.
JK: We started by talking about your background in the aviation industry. What advice do you have for young people trying to start a career in the aviation industry?
AP: I come from an aviation family. My father was a cockpit crew, so I had aviation in my blood from an early age. I think the aviation industry has a unique combination of factors attached to it. Because of this, I think that if someone is looking for exciting and interesting work and something that inspires, as opposed to just providing a steady income, then aviation is the place to be. In terms of advice as to how to get into aviation, I think there's no better way than starting at the bottom because as you progress through management to different tiers in aviation, the experiences you pick up through an initial exposure, whether it's as cabin crew, airport operations, or selling tickets, will provide a lot of background and experience as you move up the tree. And so, from my point of view, the five years I spent at British Airways doing very basic airport jobs and very basic commercial jobs have been immensely valuable for the next 25 years. That experience feeds through what I'm doing as a CEO almost every day. So, don't be too proud to take very menial jobs at the beginning because that's the way to learn. That's the way to garner experience. However, I think it is seriously quite hard to make a lot of money in aviation. I think it compensates in many other respects. I've tried to break away from aviation before, but it's very hard. It lures people back in, and I think it's a fantastic sector to work in. I certainly have no regrets at this point, and I fully believe that going into the aviation industry was the right decision for me.
