Flybe collapse puts UK regions at risk

Flybe Embraer
The company was unable to stave off collapse

Flybe has entered administration, with all flights grounded, putting access to the UK’s regional markets at risk.

It had been hoped the airline would agree a rescue deal with the UK government, despite objections from rival airline operators.

Mark Anderson, Flybe CEO, said: “Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business. This has been compounded by the outbreak of coronavirus which in the last few days has resulted in a significant impact on demand.

“Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.”

A government spokesperson said: “We have asked bus and train operators to accept Flybe tickets and other airlines to offer reduced rescue fares to ensure passengers can make their journeys as smoothly as possible.   

“We are working closely with industry to minimise any disruption to routes operated by Flybe, including by looking urgently at how routes not already covered by other airlines can be re-established by the industry.”

Ralph Hollister, analyst, travel & tourism, GlobalData, said: “Flybe blamed a number of external factors for its prolonged demise such as maintenance costs, the weaker pound and rising fuel costs. However, its competitors had to deal with these issues too. The main difference is that Ryanair and British Airways possess focused business models. Flybe was caught between the two, offering short-haul flights for prices that were not necessarily low cost.

“The impact of coronavirus may have also provided the perfect opportunity for a Virgin Atlantic led consortium to stop injecting money into a business that seemed to be some way away from achieving profitability.

“Attempts by major European carriers to dominate the market have led to an ongoing price war, which has resulted in a growing list of airline casualties. One of the first was UK airline Monarch, which went into administration in 2017. This incident should have set alarm bells ringing for Flybe. Unprofitable routes should have been scaled back much sooner than they were.

“Coronavirus could determine the fate of other struggling airlines on a global scale as world-wide demand for travel plummets. Larger airlines are also not immune from the impacts of the virus. Virgin itself announced emergency measures, including cutting executive pay, and urging other staff to take unpaid leave.”

It had been thought that the UK government had offered to allow Flybe to defer Air Passenger Duty payments on UK domestic flights in an attempt to keep the carrier from going into administration. Flybe owed around £106m.

The deferment was described as a “misuse of public funds” by Willie Walsh, outgoing CEO of IAG, in a letter to the government. Walsh wrote: "Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes. Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline. This is a blatant misuse of public funds.”

This year was due to see Flybe become Virgin Connect, with a rebrand of what was Europe’s largest regional airline after last year’s sale to Connect Airways, owned by Virgin Atlantic and its partners Stobart Group and Cyrus Capital. The consortium paid £2.8m for Flybe’s operations and another £2.2m for the parent company, promising a further £100m for the airline’s turnaround plan.

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