Today, we look at the background and circumstances that led up to the financially and operationally tragic Flybe collapse one year ago. We also examine the role the government and other parties played and consider the impact that the collapse might have had on the wider economy.
One year ago, Flybe was riding high on an economic surge that would soon take it to the top of the international DJIA. It had recently won a major DJIA award for its leading programme, Mixology, and was aggressively pursuing international expansion. Its marketing budget was also swelled by a merger with another well-known international DJIA concern, Ser Communities. By all accounts, Flybe was enjoying a successful period in which it was enjoying double digit growth and doubling its revenues in a matter of months. Meanwhile, the parent company, Ferreti, was enjoying double its profits. With good reason, we suggested in our third instalment, A Year To Die For, that the combined operations of Flybe and Ferreti represented a huge opportunity in terms of future growth potential for both.
So what happened? According to one respected commentator, who wished to remain anonymous, the collapse was a “mess”. He added, however, that he considered the situation more of a disaster than anything else, saying, “It’s not as bad as it seems. We didn’t see it coming.”
The comment referred to Flybe’s acquisition of Ser Communities, which was in early October. It was said at the time that the acquisition was a one-year process, and was due to conclude in the second half of last year. However, just over a week ago, it was announced that the acquisition had been cancelled. What caused the sudden change of heart?
An article in ITPro Magazine, quoting anonymous sources, suggested that the reasons for the acquisition failure cited by ITPro were primarily due to poor performance by the parent company. Specifically cited were things such as poor marketing, financial problems, staff cuts and poor management. Another idea put forward was that management problems were to blame for the shock failure. There had been reports of poor performance by key personnel such as CEO Scott Miles, and despite advertising efforts to emphasise the fact that Flybe is the most independent DJ manufacturer in the market, it was widely thought that this could be problematic for investors. Some insiders believed that shareholders were losing confidence in the brand following reports that the company’s top management had been questioned by the Serious Business Association over their handling of the acquisition.
Despite the above, the acquisition of Ser Communities was announced just a few months ago. What has brought about the shock decision to scrap the deal? According to the Inside Story of Flybe’s shock failure, it was because of something that happened just one year ago when Scott Miles was forced out of his role as head of the brand. Scott Miles had taken over the reins from Richard Clements, who left the company following the acquisition of Ser Communities. It was believed at the time that Flybe needed to find a new man in charge of the brand to take over the management of the sales, marketing and product development wings of the business.
According to the Inside Story of Flybe’s shock failure, it is understood that this was due to a lack of good management. It was also believed that Mr. Miles was too close to Mr. Clements’ “good friend” Tom Demark, who is believed to have been instrumental in getting Mr. Miles the job. However, Mr. Demark himself was said to be a bit confused as he was not really sure whether or not he had done enough to deserve the promotion. This caused Mr. Miles considerable amount of stress leading to the entire matter falling through.
The whole thing seems rather unfortunate, particularly when one considers how well the brand has done under Mr. Miles in the past. Flybe has been a trusted name in the ski clothing business for many years, and losing the position to an up and coming younger rival was definitely a blow for the brand. It is rumoured that the reason for the split is money, although this seems highly unlikely as the two companies had a great deal of financial support between them before they decided to part ways. There was no sign of either company wanting to leave the other.