The loss of Flybe leaves a big gap in the UK domestic air system. Still, it is probably best the government didn't step in to save it. Sometimes, market forces must play out.
The government has defended its role in Flybe’s collapse, as business groups, trade unions and passengers around the country voiced dismay at the loss of the UK’s biggest regional airline.
Flybe went into administration in the early hours of Thursday morning, with the loss of 2,400 jobs, less than two months after the government announced a rescue deal, having promised to “level up” Britain by investing in transport links.
The impact of the coronavirus on flight bookings proved the last straw for the Exeter-based Flybe, which had operated almost 40% of UK domestic flights, as the government stalled on a controversial £100m loan. Flybe was the fourth UK airline to go bust in a little over two years, following just months after the demise of travel group Thomas Cook.
While cabinet ministers raced to announce they had saved Flybe in January, when the airline flirted with bankruptcy, it was left to the transport minister Kelly Tolhurst to defend the government’s actions in the Commons on Thursday. She said the government had been working “tirelessly” with Flybe’s owners Connect Airways – a consortium of Virgin Atlantic, Stobart Air and the hedge fund Cyrus Capital – since then.
Existing problems had been compounded by the coronavirus outbreak which had a “significant impact on demand”, Tolhurst said. “The directors, therefore, decided it was not viable to keep Flybe operating.”
She added: “Unfortunately, in a competitive market, companies do fail, and it is not the role of government to prop them up.”
The Department for Transport said it would bring forward “recommendations to help ensure that the whole of the UK has the connections in place that people rely on”.
A Virgin Atlantic spokesperson said the consortium had invested more than £135m to keep the airline flying for an extra year, adding: “Sadly, despite the efforts of all involved to turn the airline around, not least the people of Flybe, the impact of Covid-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.”
However, unions hit out at both the government and the owners of the airline, which was one of the leading carriers at airports including Belfast, Southampton, Manchester, Cardiff and Birmingham, carrying around 8 million people a year. It flies to 56 destinations across Europe, including 26 in the UK and Ireland.
The British Airline Pilots’ Association’s general secretary, Brian Strutton, said: “Six weeks ago, when the ownership consortium lost confidence, the government promised a rescue package, apparently at that time recognising the value of Flybe to the regional economy of the UK.
“Throughout, pilots, cabin crew and ground staff have done their jobs brilliantly, while behind the scenes the owners and, sadly, government connived to walk away. Flybe staff will feel disgusted at this betrayal and these broken promises.”
The GMB union warned that up to 1,700 further job losses at airports and in the supply chain could follow. It claimed eight regional airports could close, where more than half of the routes were filled by Flybe.
Andy McDonald, the shadow transport secretary, said the loss of Flybe would cause “real anxiety” throughout the country.
The transport secretary, Grant Shapps, tweeted that the government was “urgently working” with the airline industry to “identify how key routes can be re-established by other airlines as soon as possible”.
Some Flybe services will be taken over by the Scottish regional airline Loganair, which said it would add almost 400 flights a week on 16 routes.
Belfast City airport said it was in talks with multiple airlines to fill the routes. Its chief executive, Brian Ambrose, insisted there was no threat to the future of the airport despite two-thirds of its passengers using Flybe, although he said there was a “significant hole”.
Job losses are likely to hit hardest in the south-west, where Flybe was based. Among the former crew was Katherine Densham, who had been due to work on a flight from Exeter to London on Thursday. She said she had worked for the airline for 13 years straight from college, and had heard in the early hours.
She said: “I feel really sad. I’m not sure what I’m going to do now. I heard in the early hours of the morning. I thought we’d be saved. I’ve no idea what I’ll do next – try and find some work to pay the bills.”
Flybe also linked Newquay in Cornwall to London under a state-subsidised flight, which another carrier is likely to take on. Kim Conchie, chief executive of Cornwall chamber of commerce, described the collapse as a “huge blow” to businesses in the area.
A review of regional connectivity was promised in January as part of the rescue deal, along with possible reform of air passenger duty, which could have come as early as next week’s budget. Flybe had long argued that its tax burden was effectively doubled as APD is paid on takeoff from UK airports, and thus applies to both legs of domestic return flights.
However, talks over a possible £100m loan from the government – a key part of the January package – ran into problems. Other airlines, led by the British Airways owner, IAG, and Ryanair, objected about the prospect of state aid and threatened legal action. While Flybe had hoped to hold out for better news at the budget, the impact of coronavirus on business travel and passenger demand was accelerating losses.
Flybe’s chief executive, Mark Anderson, said: “The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.”
Flybe’s administrator, the accountancy firm EY, referred to coronavirus in its statement as it flagged “added pressures” on the travel industry in the past few weeks that made its precarious financial situation worse.
The airline had long struggled to balance the books, despite cost-cutting plans and redundancies, and was reporting losses of about £20m a year before the Connect takeover in early 2019. The impact of Brexit included lower demand and rising costs due to the decline of the pound, with airlines purchasing fuel in dollars.
The UK Civil Aviation Authority (CAA) announced around 3.30am on Thursday that Flybe had entered administration and that all flights were cancelled. It said it would not be operating a repatriation programme for any stranded customers in Europe, and said passengers should make their own alternative travel arrangements via other airlines, rail or coach operators.
Train firms said they would honour Flybe tickets that matched rail routes and give free travel to staff to return home. National Express said its coach network would also let Flybe ticket-holders travel free. EasyJet and Ryanair have offered rescue fares for passengers.
This article was written by Gwyn Topham Transport correspondent from The Guardian and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.
Subscribe to Skift Pro
Subscribe to Skift Pro to get unlimited access to stories like these ($30/month)Subscribe Now
Photo Credit: UK regional airline Flybe went out of business on Wednesday. The government chose not to save it. Bloomberg
Blackstone’s $305 Million Hotel Grab Shines Light on Acquisition Climate
Major real estate and investment groups like Blackstone and MCR Hotels will garner the most headlines around hotel acquisitions coming out of the pandemic. There's simply not enough brands out there for a company like Marriott to make a splash on the M&A front.
Cameron Sperance | 50 mins ago
Cuba Starts Staggered Reopening Ahead of Tourist High Season
The goal is to vaccinate 90 percent of Cubans by mid-November. If officials hit that goal, tourism-related businesses will breathe a huge sigh of relief in anticipation of visitors returning to the island.
Nelson Acosta Writing by Sarah Marsh, Reuters | 20 hours ago