Entrepreneurs Forum
Philip Meeson, Jet2

Plane speaking

Thursday 16 July 2009 6:00

Jet2 is never going to be a fully-fledged business airline, its chief executive tells Peter Baber. But that doesn’t stop it being a business success.

This magazine is all about success, so as we launch in Yorkshire towards the end of one decade, it seems appropriate to think back on some of the region’s business successes of the past decade. If you do, it’s not long before the name Jet2 comes to mind. In a survey last year, the airline was second only to Yorkshire Forward in terms of Yorkshire brand names that had come to prominence in the past decade.

I certainly remember the excitement back in 2003 when word first got out that Yorkshire was going to have its very own version of Easyjet or Ryanair. The airline was - still is - part of the Dart Group, which was based in Bournemouth. But it had specifically targeted Leeds Bradford because at the time it hadn’t been well serviced by low-cost carriers.

What’s remarkable is how much the airline has grown since then. From two aeroplanes and six routes in 2003, it now flies to 43 destinations and is adding more all the time; Corfu the latest to be in its sights.

The airline, now with a turnover approaching £320m, has also expanded to other airports, though Leeds-Bradford remains its core, with12 of its aircraft based at the airport, compared with three in Edinburgh, two each at Newcastle, Blackpool and Belfast and six at Manchester, which means that for once Leeds gets one over on its supposedly mightier rival across the Pennines.

Dart’s headquarters have moved north to Leeds too - and when we say moved we do really mean moved. A group of prefab offices that had previously nestled in Teynham - one of Jet2’s sister company Fowler Welch Coolchain’s depots - was uprooted and moved to a site just off the runway at the airport. Operations for an organisation that now employs up to 2,700 people at the height of the summer are now run from here.

So it’s not surprising that there are people in the city who are setting great store in the airline and how it might turn what was once a sleepy little airport into a major business destination. Members of the Leeds financial community, for example, didn’t take long to arrange a trade mission to Dusseldorf as soon as Jet2 started flying there.

Such hopes, however, are likely to be somewhat deflated when you get to meet Philip Meeson, the former aerobatic pilot sponsored by Marlboro cigarettes, the chief executive who founded Channel Express, which eventually became Dart and thus Jet2, way back in 1983. Jet2 is first and foremost, he says, an airline for the leisure traveller.

“We are building a leisure airline oriented to people’s holiday destinations,” he says, adding that Dusseldorf is probably the only primarily business destination the airline flies to. “Although most of our city routes probably have about between 30 or 40 per cent business on them,” he adds.

Such routes include Paris, to which Jet2 flies twice daily, as well as Amsterdam, Budapest, Milan and Rome. But that is why Jet2 will not, for example, be following the example of its rival Flybe, which in June reopened the route between Leeds Bradford and Gatwick with a twice-daily service.

Jet2 used to fly to Gatwick from Manchester and from Leeds Bradford to London, says Meeson, but you can’t compete with the trains, whoever happens to be running them.

“I am not saying they are on a hiding to nothing,” he says, “but if you’re in London or in the north of London, the service from St Pancras is fantastic.

The size of aircraft we’re operating need to have the volume of leisure passengers. Business passengers want frequency, so they can jump on an earlier plane if a meeting finishes early.

Smaller planes can deliver that frequency, but we’re really in a volume business, which means leisure.

We’re targeting leisure routes on which we welcome business people.” It’s also why he dismisses any comparison with Michael O’Leary’s Ryanair, and in particular with the latter’s ambitions to take over a national airline.

“He is running a point-to point city airline,” he says. “We’re not.” Dart Group as a whole is set to make a profit of £28m this year, and Jet2’s load factor – a key measure of success in the airline industry – having started at around 79 per cent, now stands at 87 per cent.

“On some routes, it’s 95 per cent,” says Meeson. In contrast, in June this year British Airways’ load factor was 75.1 per cent, a drop of 1.0 per cent on last year. For the past two years, Jet2 has also been building up its own holidays business, Jet2 Holidays.

The amount it contributes to the business, Meeson says, “is quite small at the moment – about 70,000 packages this year, but we’re aiming to build that over the next few years,” he adds.

“We’ve spent £8m on marketing the holidays, with a marketing team of 13 people, plus a little bit on PR.” That, he says, will expand the choice for Jet2 customers.

They can go for what he calls a ‘seat-only product’ – in other words, a flight – or choose from one of the hotels mentioned on the company’s website, or go for the full holiday package.

The airline is also unique among the low-cost sector in the UK in using Boeing 757s, which carry around 230 passengers compared with the 145 carried by the more conventional Boeing 737-300s.

Meeson is clearly impressed with these beasts, and the airline is buying three more of them this year.

“They have tremendous operational performance,” he says, “being able to get from Leeds to New York or Sharm-El-Sheikh non-stop, and are very efficient, with very low emissions. None of the other low-cost airlines use them. I suppose it’s because they are quite large, and you have to have a catchment area able to support them.

But we always believed in the Leeds and Manchester catchment area.” So how then, is Jet2 managing to do so well? There were all sorts of rumours in the press over the winter that it was going to be a victim of what were then shocking oil price hikes.

The price of oil has since come down, and is now on the way up again, and a key question in the airline industry is to what extent you have hedged the price of oil. Meeson won’t talk about such issues because of their sensitivity, except to say: “We do hedge, but we are careful.” He thinks Jet2’s success lies in careful planning.

“We carefully tailor the frequencies of our routes to passenger demand,” he says.

“For example, we fly to Sharm-El-Sheikh, but only once a week from Leeds Bradford and once a week from Manchester. We fly twice a week to Cyprus. We’re careful with our frequencies, and our destinations. Expansion has been a constant problem in the airline industry. We have expanded carefully and are committed to expanding, but at a sustainable rate.” Meeson is similarly protective about the airline’s brand. The tagline, ‘Friendly low aircraft as the Yorkshire rose. And yes, it does charge for hold baggage.

“If people are just going to carry a handbag, we welcome that and don’t need to charge them,” he says. “But if they are going to check it in, there is a cost in that, and why should people who are not checking baggage in pay for it? But we welcome both. We are a friendly airline.” It’s why he will not be following in the most talked-about new development in the low-cost sector this spring – Michael O’Leary’s plan to start charging Ryanair passengers for using the toilet.

“Certainly, we have no intention of charging people for using loos,” says Meeson. “I don’t actually believe Ryanair will either. But what he does, he does. We know where we are. The whole company is out to make the start of the holiday a real pleasure for people.” That includes making sure you pick them up and drop them off at a friendly time.

“If you are going to Cyprus, we take off at half past eight or nine in the morning, not three in the morning,” he says. “And we come back at a decent time. People don’t want to be dumped at some airport at 3am. That’s part of our success. It doesn’t really limit us. Maybe we don’t get quite as much out of our aeroplanes as some other people do, but it’s a great way to build our business and give people a great experience.” Of course, no matter how well you’re doing, it always helps to be part of a larger organisation.

Jet2’s sister company, Fowler Welch Coolchain, can also trace its roots back to Channel Express, the company Meeson founded in 1983. That company flew fresh flowers from the Channel Islands to Bournemouth Airport.

The airside part of the business grew first with charter flights: Dart still runs a joint venture with Titan airways which runs delivery flights for Royal Mail, and Jet2 itself ran 1,100 charter flights last year.

It was rumoured to be the airline behind Take That’s comeback tour. Meanwhile, the truckside of the business went on to become what is now the largest supplier of temperature-controlled produce to Tesco.

The company has three depots – a headquarters in Spalding and a site in Washington, Tyne & Wear, in addition to the site in Teynham from which the Leeds Bradford office originated. Both Spalding and Teynham are legacy sites, because unlike Jet2 the £125m company has grown by acquisition.

Meeson, who still spends around two days a week on the Fowler Welch Coolchain business, says there are obvious advantages to running two companies in this way.

“Although Jet2’s passenger numbers are very good this summer,” he says, “and we are going to be slightly ahead of predictions, there will still be people staying at home this summer, and that is good for Fowler Welch Coolchain, because people will be eating salads and having barbecues. It will have a very good year.” Meeson says the friendliness he sees in Jet2 also explains why it went for airports like Leeds Bradford and Blackpool.

“We love these small local airports, where you can park reasonably conveniently, and ten minutes after you check in you can be sitting in the departure lounge and just walk out to the aeroplane,” he says. For that reason he is not bothered about Leeds Bradford’s new owner’s expansion plans being put on hold.

“Passenger numbers are static here,” he says. “and the growth has been our growth.

The airport doesn’t need new facilities, and new facilities mean extra cost.” But every airline will tell you, at least in public, that along with trying to convince as many Yorkshire folk as possible to take a short break in Europe, they are equally committed to enticing the Continentals to come and experience our delights.

Is Jet2 as committed to inbound tourism? Meeson insists it is, and says his company is an enthusiastic supporter of Welcome to Yorkshire, the newly named Yorkshire Tourist Board, led by Gary Verity, who he says is doing ‘a great job’. But he is a little more vague about what his own role is within Welcome to Yorkshire.

And when I ask which is harder - persuading Yorkshire folk to go to Spain or persuading Spaniards to come to Yorkshire, he stares at me and says: “Did you do any O-Levels? What do you think?” Nevertheless, he wheels in one of his marketing team leaders to tell me exactly how much they are supporting promoting Yorkshire overseas.

They run joint campaigns with Welcome to Yorkshire, particularly at the start of the summer season, and have discovered through research that Dusseldorf is their most popular starting-off point for inbound tourism, with on average 35 per cent of the flight taken up with that.

That’s followed by Amsterdam with 30 per cent, and Paris with 20 per cent. Spain is still some way behind. Then Meeson jumps in with an explanation for some of this - onward connections from the airport.

“Once you get here, the station is a 20-minute trek, and the road is crowded,” he says.

“Foreigners coming here must feel lost when they get to this airport.” He is much more keen, as are most of the airline industry these days, to tell me about the other way his company is being friendly – by trying to limit his aircrafts’ carbon footprint.

He even rings me the next day to tell me more about it, insisting it is not just a problem for the aviation industry.

“Airliners only produce two per cent of the CO2 in the world,” he says, “but we have to be environmentally aware. We have 149 different points that we have been looking at for a critical view of how to reduce our emissions.

Fuel efficiency is better for us as an airline and for the planet, but it comes down to planning.” This is the one area where he does appear to get heated, suggesting that there has in the past been a problem with Manchester Airport air traffic control – which controls much of the air space around Leeds Bradford – allowing too many aeroplanes to circle for too long. So the airline has been in discussions with them about how to improve the situation. Other action it is taking on its own includes fitting winglets to its 757s – at a cost of $1m per aeroplane.

“That gives a 5 per cent fuel saving,” he says. Unlike some airlines, Jet2 has a policy of not turning on the auxiliary power unit which powers the internal workings of the aeroplane when it is stationery at a gate. Instead, it relies on each airport’s own power supply. But perhaps the most striking change comes in flying itself.

“We are looking at flying at the most fuel-efficient altitude and the most fuel-efficient speed,” he says, “so we have actually slowed our top speeds down by 8 per cent.” That, he says, shouldn’t be enough for most people to notice.

But it’s a thought that, if you ever feel you are running late on a Jet2 plane - an experience which should be a rarity, as it has one of the best punctuality records in the low cost sector - you can relax in the knowledge that there may be a very green reason for your delay.