Review of Operations
Jet2.com
Jet2.com now operates 29 owned Boeing 737-300 and Boeing 757-200 aircraft with additional capacity leased-in seasonally, as needed, to meet demand, from its six airport bases in the North - Leeds Bradford, Manchester, Newcastle, Belfast, Blackpool and Edinburgh. The company has a thriving passenger charter business and a long-term contract with Royal Mail to fly its unique Boeing 737-300 "Quick Change" aircraft on nightly mail flights throughout the UK. Following these flights, the aircraft are reconfigured to make a full operational contribution to the company's passenger flying programme.
The company has now substantially completed the move to Leeds Bradford International Airport - even transporting its Portacabin "duplex" office buildings from Bournemouth for occupation at the new airport site. Some engineering administration functions, together with the management of the Royal Mail operation, will remain in Bournemouth.
The company has significantly increased the number of city, sun and snow destinations it serves from each of its bases this year. Five new routes were opened from Leeds Bradford, eight from Manchester, seven from Newcastle, five from Belfast and four from Blackpool. For further details, visit our website at www.jet2.com.
The company believes that The Canary Islands, which have formerly mainly been served by charter flights, will become an increasingly popular scheduled service destination, ideally suited to the performance of our 235 seat Boeing 757 aircraft. After successful services last winter to Tenerife and Lanzarote we will be operating up to 27 flights a week to the Islands this financial year. The Canary Islands Tourist Authorities will actively promote the destinations throughout our region and bookings to date are encouraging. The company plans to further expand its longer distance services and winter sun routes to enhance our overall offering to our customers.
Our ancillary revenues are a vital contributor to our income and allow the company to offer the lowest possible fares. Ancillary revenue per passenger increased by 39% in the year ended 31 March 2007 and it is anticipated further growth will be achieved in the new financial year. Contributing to this are charges for hold bags, extra leg room, seat allocation, internet check-in, commissions on sales of insurance, hotel and car hire and profits from on-board sales of food, beverages and gifts. The promotion of this sector of the business is hugely important. Crews are highly incentivised to continually increase on-board sales and great effort is made to introduce new products and find the best and most competitive providers.
The company is also working hard to ensure that its aircraft are flown in the most environmentally friendly and fuel efficient way. A full time project General Manager is committed to continuous monitoring of our fuel and environmental performance.
Jet2.com is committed to contracting out many of its support operations, such as its call centre and purchase ledger functions, which are now handled extremely capably in India. However, it was decided this year to undertake our own check-in and handling of passengers and aircraft at Leeds Bradford and in several airports in Spain. By bringing these operations in-house, we will offer a better more efficient service at a competitive price. Our aim is to be regarded as a friendly airline with good customer service. We know that our staff will achieve this.
During the year the company acquired five Boeing 757-200 aircraft. The Boeing 757-200 is a versatile aircraft able to carry up to 235 passengers over 3,000 miles. Its overall performance is particularly suited to Leeds Bradford which is a high airport with some operational constraints. The Boeing 757-200 allows the company to offer a range of destinations from both Leeds Bradford and its other bases that other aircraft cannot match. At the same time it is extremely environmentally friendly in terms of noise, fuel efficiency and emissions. We expect to increase our Boeing 757 fleet over the coming years and also to operate similar, larger types which will allow our customers to explore an expanding range of popular destinations at the lowest possible fares.
On 17 June 2007, we were pleased to sign a 15 year agreement with Pratt & Whitney for the fixed-price maintenance of the CFM56-3 series engines which power our Boeing 737-300 aircraft. Pratt & Whitney will also increasingly supply various parts that they will manufacture for this engine under their Global Material Solutions Programme. This agreement brings both price certainty and cost reductions. We look forward to a long and successful association with Pratt & Whitney.
The company now operates seven Boeing 737 Quick Change and one Freighter for the Royal Mail nightly. These are based at Newcastle, Belfast, Edinburgh, Stansted and Exeter. The Northern based aircraft fly Jet2.com passenger services during the day before their 40 minute transformation into mail aircraft, during which the seats are removed and mail loaded in containers. The Stansted based aircraft also flies a very busy charter programme both for tour operators, specialist holiday providers, and in support of promotional and sporting events. This is a business in which the company has a long history of success and which we expect to further develop in the future alongside our low-cost services.
Fowler Welch-Coolchain
Fowler Welch-Coolchain has distribution centres strategically located in Spalding, Lincs, Teynham, Kent, Stockport, Cheshire, and Washington, Tyne and Wear, and is one of the UK's leading temperature-controlled distribution businesses, specialising in the distribution of fresh produce and chilled foods on behalf of UK supermarkets, other multiple retailers and their suppliers. In addition the business has substantial pick-to-order and warehousing capabilities, together with a growing ambient (non temperature-controlled) distribution business. It is the company's strategy to grow and invest in each of these business areas. During the year considerable investment has been made in the development of the company's IT systems to ensure the most cost-effective and efficient service is delivered to our customers.
The distribution market place is, of course, very competitive and cost-conscious. Nevertheless despite these challenges the company grew its business this year with increased sales in both chilled distribution, pick-to-order and warehousing operations, as well as building its new revenue stream in ambient distribution.
On 28 April 2006, the Group acquired the business and assets of R F Fielding Cheshire Ltd (In Administration), a business specialising in ambient distribution to major retailers and other wholesalers. Sales in this area are expected to grow in 2007/08 due to a new business win from a major supermarket group. As a result of its strategic location in Stockport, Cheshire, more efficient fleet synergy and utilisation for the whole distribution business has been achieved through the new flows of product for distribution from the North West.
On 3 July 2006, the Group sold its Channel Islands' transport and distribution business to a third party specialising in this sector of the market. In the light of the decline in the Channel Islands' horticultural industry, the Board considered this business was no longer core, and that management time should be freed up to concentrate on growing the mainland UK logistics operations.
Pick-to-order operations have been an important area of growth in recent years and this trend continued in 2006/07. In a typical week Fowler Welch-Coolchain picks and delivers approximately 1 million cases of prepared meats, cheeses, ready meals and pasta. An ambient goods picking operation is also carried out in Stockport providing important volumes which feed into the distribution network. The new computer system to support the growth in this market segment is also currently being implemented.
The lack of warehouse space and associated facilities for vehicles at the Gateshead site had become a constraint on growth in this region. It was, therefore, necessary to find bigger premises to enable the company to tender for larger contracts in this area. During the year a new 8 acre freehold site was purchased in Washington, Tyne and Wear. The 40,000 sq.ft. warehouse facility, which is currently being converted for the company's operations, will be the first multi-purpose ambient and chilled warehouse in the business, thus enabling both ambient and chilled distribution customers to be serviced from the same depot. Although the premises are currently operational, further coldstores and seven loading bays are presently being built. When complete, the new building, costing in the region of £5.5m, will provide a first-class facility for customers in this important region.
Fowler Welch-Coolchain offers a quality logistics solution to supermarkets, growers and food manufacturers based both in the UK and mainland Europe. With the recent investments in new premises in the North East of England, together with the ambient business in the North West the business offers a truly national solution to its customers' supply chain needs.
The ongoing need to be cost competitive remains a key business driver and the company believes that as volumes grow it will increase its competitiveness in the marketplace. Looking forward, the business anticipates a further year of growth in 2007/08 and is confident that it is competitively placed to take full advantage of the opportunities in this sector in the future.