The least surprising development in the Flybe saga was Willie Walsh throwing a tantrum. The rescue of the struggling regional airline is “a blatant misuse of public funds”, thundered the boss of IAG, owner of British Airways, as he made an official complaint to the European commission.
That’s the same IAG, note, that enjoys a feather-bedded life thanks to its control of 56% of the landing slots at Heathrow, the most capacity-constrained airport in Europe. BA doesn’t get a leg-up via grubby Flybe-style negotiations with ministers but, if the airline industry wasn’t so riddled with politics, and if flag-carriers didn’t enjoy such lobbying power, IAG’s share of landing slots at Heathrow would have been capped at 30% a long time ago.
The continued existence of Flybe maddens Walsh for a couple of reasons, one suspects. First, it is partly owned by the hated Virgin Atlantic. Second, Flybe indirectly secured a few slots at Heathrow via the fallout from BA’s takeover of British Midland in 2012; the competition authorities, in a rare act of resistance, took the view that BA was big enough already at London’s main airport and domestic consumers would benefit from greater choice. Walsh is not a voice of impartiality on Flybe.
None of which is to deny that there are big questions to be answered about the rescue package. The Virgin-led Connect consortium has yet to explain how much money it has invested since it bought the assets for a mere £2.8m less than a year ago, and why crisis has arrived so soon. Making money from regional aviation is hard, as evidenced by Flybe’s many problems over the years, but that’s a reason to have a better plan B than begging for a deferral of an Air Passenger Duty (APD) bill and a short-term loan.
It may be that the Connect crew is dysfunctional. Virgin Atlantic, 49%-owned by US carrier Delta, is mostly interested in delivering passengers to Heathrow and Manchester for transatlantic flights. Stobart would like more flights out of its Southend airport. Cyrus Capital, an obscure US investment firm, may have viewed the Flybe takeover as a short-term punt that could be abandoned if it threatened to become expensive.
Those caricatures may be exaggerated, but the government is taking a risk in backing, even for a while, a consortium that looks fundamentally unstable. The fact that a review of APD has suddenly been thrown into the mix says this is a case of policymaking on the hoof.
Yet it’s hard to say definitively that the government has done the wrong thing. If the aim is to ensure that Flybe survives until the peak summer season, that’s not so silly. The approach buys time to develop a coherent strategy. By contrast, the instant demise of Flybe would have been followed, almost certainly, by crises at several regional airports. The government’s ability to implement any policy would have evaporated.
What would a sensible strategy look like? Well, there’s certainly a case for redesigning APD as a tax on emissions, rather than being a per-passenger charge. A straightforward reduction in APD – in other words, a pro-flying bung at a cost to the public purse – would make a mockery of the UK’s carbon-reduction ambitions.
As for regional connectivity, the important thing is that the government doesn’t become beholden to Flybe’s unreliable owners. If it is really essential (a debate in itself) to run uncommercial flights between regions, let operators pitch for low-margin management contracts. Flybe doesn’t have to get the gig.
Most of all, though, make the current help for Flybe transparent. A short-term sticking plaster could be a pragmatic fudge, whatever Walsh says, especially if it means Flybe is more likely to pay its APD liability in full. But any deal that underwrites the current owners would be completely unacceptable. “The government has not given any state aid to Flybe,” says the business department. Let us hope that statement is true. And, if it is, make sure it stays true.
Expect Davos carbon neutrality to be drowned out by private jets
Still on aviation matters, here comes the World Economic Forum to claim that its Davos shindig will be a carbon-neutral event this year.
Maybe it will be, but it’s safe to assume that many of the big-name participants from business, banking and politics will arrive in Switzerland via private jet. It happens every time, and instantly undermines all the worthy speeches about tackling the climate emergency.
The aim this year, by the way, is to produce a manifesto for “a cohesive and sustainable world”. Of course it is.
