Flybe failed despite £135m cash injection

Ministers are being urged to come up with answers over maintaining regional connectivity following the collapse of Flybe, putting 2,400 jobs at risk.

As some airlines started issuing rescue fares for stranded passengers, questions were being asked about the viability of regional airports such as Belfast City, Exeter and Southampton which were hugely reliant on Flybe flights.

More: Flybe collapse confirmed in the early hours of Thursday

Flybe: Doubts over rescue deal as new chancellor ‘opposes APD cut’ [Feb 18]

Alan Hudson, Joanne Robinson, Lucy Winterborne and Simon Edel of accountancy firm Ernst & Young (EY) were appointed as joint administrators in the early hours of this morning.

Joint shareholder Virgin Atlantic confirmed that more than £135 million had been pumped into the airline over the past 14 months to keep it flying.

This amount included about £25 million of £30 million committed in January 2020, alongside a ‘Time to Pay’ arrangement with HM Treasury for Air Passenger Duty to the value of £3.8 million.

A Virgin Atlantic spokesperson said: “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.

“As a priority we are looking at options to provide support to Flybe staff and to assist affected customers.”

Virgin Atlantic, Stobart Group and Cyrus Capital Partners formed the Connect Airways consortium which intervened in 2019 to prevent the collapse of Flybe and keep Europe’s largest regional airline flying. 

Flybe carried 8 million passengers a year between 81 airports, with more than 210 routes across 15 countries and 2,400 staff.

Joint administrator Alan Hudson said: “Despite an agreement with the government to provide assistance to the company, added pressures on the travel industry in the last few weeks have further deepened the severity of its financial situation.

“Flybe had already been impacted by rising fuel costs, currency volatility, and market uncertainty.

“As well as carrying out our duty as administrators, we are also supporting Flybe’s employees and customers at this incredibly difficult time.”

The Civil Aviation Authority confirmed that all Flybe flights had been cancelled. Franchise partners Eastern Airways and Channel Islands carrier Blue Islands are maintaining services.

EasyJet is working to help affected passengers by offering a dedicated rescue fee for customers until the end of March.

“A fare of £65 (€72) including a 15kg hold bag will be available on presentation of their original Flybe booking reference,” the airline said.

The government pledged to bring forward recommendations to “help ensure that the whole of the UK has the connections in place that people rely on” through previously announced reviews of regional connectivity and Air Passenger Duty.

A government spokesperson said: “The vast majority of Flybe routes are served by different transport options, and 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 know this will be a worrying time for Flybe staff and our Jobcentre Plus Rapid Response Service stands ready to help them find a new job as soon 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.”

Flybe’s financial difficulties were described by government as being “longstanding” and pre-dated the coronavirus outbreak, the spokesperson added.

But Labour shadow transport secretary Andy McDonald described the failure as “disastrous news” which will cause real anxiety for many UK regions.

He said: “Flybe has provided critical connectivity for many locations throughout the country, especially where there is currently no realistic transport alternative other than flying.

“The government has to answer how those vital links will be maintained following Flybe’s collapse. Communities will be concerned about what this will mean for their local economies.”

He called on transport secretary Grant Shapps to “come up with answers to these questions as a matter or urgency.”

Stobart Group confirmed that the ongoing ability of its airline Stobart Air to continue to trade “is not directly impacted” by the Flybe failure.

The company said: “Flybe had shown promising signs of a turnaround despite the delay to receiving merger control clearance from the European Commission for its acquisition.

“However, despite the best efforts of all, not least the Flybe people, the impact of Covid-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.

“As a result of this news, London Southend airport will see a short-term impact, with Flybe having planned to operate ten routes from the airport from spring of this year.

“However, the long-term prospects of that airport remain compelling.”

Airport Operators Association chief executive Karen Dee said: “The announcements in January of a review into Air Passenger Duty and regional air connectivity were seen as a sign that the government understood the vital importance of regional connectivity and the damaging impact of APD.

“It is extremely disappointing that just a few weeks on, the promised urgent action has not led to a workable solution and that the reviews have made no progress.

“The government now needs to urgently step up to the plate to help UK regions recover from this major blow.

“The economic and social value of regional aviation connectivity is impossible to overestimate, with thousands of jobs in every UK region relying directly or indirectly on their local airports and their route networks.”

Tim Alderslade, chief executive of industry body Airlines UK, said: “Flybe’s problems were known to many and the sector as a whole is going through an incredibly tough period with the coronavirus hitting bookings and dampening demand, and this is being felt across the board.

“That said, this is now the fourth UK airline to go out of business in two years.

“The government is right to say aviation is a commercial proposition and the market should win out – but they are not using the policy levers at their disposal to help the sector.

“APD is the prime example of a disproportionate and penalising policy that is actively holding us back.

“Leaving the EU presents ministers with opportunities to intervene – for example getting rid of the double domestic APD anomaly, reforming EC261 or using PSOs [public service obligation routes] in a more imaginative way – and these should be explored asap, with next week’s Budget presenting the perfect opportunity.”

A spokesperson for AGS Airports, which owns Aberdeen, Glasgow and Southampton airports, said: “The loss of Flybe is a devastating blow for the airline’s employees and the tens of thousands of passengers who relied on its routes.

“It unfortunately brings into stark focus the fragility of the UK’s domestic connectivity.

“Earlier this year the UK government committed to levelling up all regions of the UK by conducting a review of regional connectivity.

“It’s vital this work is progressed as a matter of urgency and reforming Air Passenger Duty is part of that review.

“We are already speaking to other airlines about backfilling the routes operated by Flybe for which there is clear demand.”

The Transport Salaried Staffs’ Association called on the government to “learn the lessons” of the collapse of Thomas Cook and nationalise Flybe.

General secretary Manuel Cortes said: “If the government stands aside as Flybe goes to the wall then we will know ministers have learned absolutely nothing from the collapse of Thomas Cook last year.

“Back in September Boris Johnson said stepping in to save a cornerstone of the British high street amounted to a moral hazard.

“That was an outrage and it would be outrageous and needless to let Flybe go under. The government should nationalise the airline now.

“Johnson would do well to remember that this carrier connects regions around the UK which badly need investment after too many years of austerity. They do not need to lose yet more jobs, which would be a bitter economic blow.

“The time for the government to act is now, there should be no repeat of the shambles they created in dealing with Thomas Cook which ended up with taxpayers footing a far higher bill than it would have cost to keep Thomas Cook afloat and thousands of hardworking people in their jobs.”

Unite union national officer Oliver Richardson said the entire staff at Flybe will be feeling “angry and confused” about how and why the airline has been allowed to collapse.

“It is simply outrageous that the government has not learned the lessons following Monarch and Thomas Cook’s collapses, the much promised airline insolvency review has still not materialised,” he said.

“While other European countries are able to introduce measures to keep airlines flying when they enter administration, the UK remains unable or unwilling to do so.

“The UK economy is highly dependent on a viable and supported regional airline and airport network.

“For central government not to support and nurture this, especially as we deal with the twin uncertainties of Covid-19 virus and Brexit, is unhelpful and irresponsible.

“Other major airlines have repeatedly said that they are ready and willing to organise flights on Flybe’s routes and for the sake of the passengers and communities that the airline served, the government must ensure that those commitments become reality.”

Mark Anderson, chief executive of Flybe parent Connect Airways, told staff that coronavirus had impacted the airline and its shareholders – which include Virgin Atlantic and Southend airport owner Stobart Group – and put “additional pressure on an already difficult situation”.

He apologised for not being able to secure the funding needed to support a turnaround plan for the airline.

“While our shareholders and the leadership team have worked with the government and key suppliers to try to get the funding and support needed, this has not materialised,” Anderson said.

Eastern Airways said passengers booked to travel today, Friday or Sunday should turn up and travel as normal following the closure of Flybe.

Announcements will be made on the Eastern Airways website about flights for next week onwards.

Belfast City airport chief executive Brian Ambrose said: “Flybe had operated a strong and profitable base of 14 routes to key regional destinations across the UK.

“The airline was a significant economic driver for the region, carrying 1.6 million passengers to and from Belfast in 2019.

“I am confident that these well-established routes, coupled with our city centre location and recent £15 million investment in terminal facilities, will prove an attractive option to airlines.

“Negotiations with a number of carriers are already underway.”

Which? Travel editor Rory Boland said: “This will be terrible news to Flybe passengers, many of whom were loyal customers and used the airline regularly.

“Unlike Thomas Cook’s collapse, most people flying Flybe won’t have Atol protection so the government is unlikely to step in and repatriate those abroad or provide refunds.

“Instead passengers with travel insurance should check if their policy includes scheduled operator failure cover.

“Alternately, those who booked tickets costing more than £100 with a credit card will be able to claim from their credit card provider.

“If the tickets were under £100 or booked with a debit card, passengers can try to use chargeback from their bank or card provider.”

Premier Holidays has set up an emergency team at its head office to deal with all affected customers. It can be contacted on 01223 516333,

Debbie Goffin, Premier Holidays sales and marketing director, said: “Our customers and their travel plans are our priority and we will be contacting them to reduce the impact of this news.

“We have a number of customers booked on Flybe flights throughout 2020 and we will be dealing with these departures in date order. We appreciate your patience while this takes place.

“Our thoughts go out to our friends and colleagues at Flybe and to all customers whose holidays have been affected. All of our bookings are financially protected so we will now be working to find alternative routes or flights for customers.”

The airline was originally formed in 1979 as Jersey European Airways and operated under the Flybe name since 2002.