So is it right that Coronavirus and Air Passenger Duty were to blame?
Hello and welcome to my CreatingRipples PodFilm!
Do you feel the turbulence of life from the affects of Work, Austerity, Brexit, Elections, Politics and now Coronavirus; don’t worry, you are not alone?
The collapse of Flybe was perhaps inevitable, but not certain until the early hours of Thursday 5 March, when all aircraft were safely on the ground and the website had been closed. Before official notice of the airline’s closure was confirmed, I was already receiving messages from Consumers concerned that they were about to lose their money; but more about that later.
The cause of the collapse was quickly subscribed to Coronavirus, which may have been the final nail in the coffin for the airline, but to suggest that it was the cause of the airline’s ills, is a stretch too far.
If we stand back and look at the world of travel and in particular, aviation, there has been for several years I believe, a perfect storm brewing. Austerity, competition for a tighter passenger market, terror attacks, political upheaval affecting oil prices, brexit, concerns on aviation safety and now the latest entrant, coronavirus, have all created that perfect storm.
In the case of Flybe, there are however a couple of other elements. At the beginning of 2020, the world of travel was shaken by the news that Flybe could go under and it would appear that its supporting consortium had lost faith in the airline which apparently limited their desire to plough cash into Flybe.
They called upon the government for assistance and it appeared that the newly elected Tory government was going live up to it promise of State Aid. It had been apparently decided to offer an attractive-rate £100million loan and consideration was to be given to providing a ‘tax-holiday’ to the airline for Air Passenger Duty (APD) along with a review of that tax.
You don’t have to be a politician to guess what came next; that’s right, other airlines said hang on a minute, Flybe are receiving an unfair advantage, we want the same benefit to be extended to us. It was also ironic that some airlines also made a formal compliant to the European Commission about the unfairness and questioned the proposed State Aid.
Then things went quiet and the airline continued to operate.
When the airline collapsed, it was clear that neither the Government nor the Consortium held any confidence in Flybe’s operations and therefore withdrew support.
But, reading the newspapers and listening to some commentators, they were offering the public the news that the collapse was due not just to market conditions, but also the ‘tax-burden’ or ‘tax-concerns’ on APD. On the issue of APD I say, what a load of absolute ill-informed nonsense!
For those who don’t know, APD was introduced as a Carbon or Climate tax in 1993/94. The tax is added to the price of your ticket, so collected by the airline, and once you’ve taken your flight, the airline has a duty to pass that tax onto HMRC. This is not a tax-burden on any airline because they do not pay this tax, the Consumer does. The burden as such on any airline will be found in the administration of the tax, which is why some airlines, if you haven’t taken the flight and want your tax paid back, impose an administrative charge which coincidentally appears to match the tax paid, some make no charges and some, well some you can’t even find their charges; but that’s the subject for another podcast or podfilm!
The second important aspect concerns the government itself. Fear, loathing and a new dogma has become entrenched. Ministerial sackings and resignations all tend to suggest that the rise of the one-nation tory is over and that a hard market philosophy is now the dominant species at the heart of government.
But there’s nothing new there. Over many years I have commented upon the unfairness of charges, school holidays costs and so on. There is always the implied belief in broadcasters questions, that somehow the government should do something. The truth is that this government and in fact I think many Westminster politicians believe in the power of market force to regulate the market and will refuse to intervene. In the case of Flybe, this market forces philosophy dominated the discussion and the die was cast for the failure of the airline.
I have long believed that the situation with airlines and even with travel companies is that we simply take on trust that our favourite travel companies enjoy good liquidity and that there is a robust system in place to manage their liquidity or compliance with regulation. Unfortunately, in my view, that is not the case, as is evidenced by the collapse of many companies over many years. Consumers bear the brunt of these collapse, having to navigate the merry-go-round in order to get their money back.
Take the case of one Consumer who contacted me to tell me about their experience following the Flybe collapse. They had 3 flights booked to Belfast. The Civil Aviation Authority (CAA) advised the Consumer that Flybe did not hold an ATOL licence and that they should head toward their credit card issuer, offering their rejection letter, the link of which did not work! They tried to contact their bank and encountered difficulty in finding the correct number to speak to them on. Not deterred, having spent a whole day researching and speaking with people on the phone, she received her money back from the bank on condition that the rejection letter from the CAA was sent to them! Imagine how many Consumers out there right now are experiencing similar difficulties!
This is why we need to remove the potential for this direct and practical detriment from Consumers and create a regime whereby Airlines and Travel Companies are demonstrably ‘Fit to Trade’ with sweeping powers for a regulator to manage operations for the benefit of Consumers. Such a ‘Fit to Trade’ status is not just necessary, because of the vast sums of money paid by Consumers, but continuing to trade each year should only be allowed on a renewable and publicly transparent basis in order to deliver a Consumer confident market.
I can hear the groans and outrage as I speak!
Coming back to Coronavirus, I noted this week, the effect of this Global Health crisis on aviation operations. IATA (International Air Transport Association) has called for a loosening of the rules on airport slots, which essentially state: “use-it-or-lose-it”, whilst airlines adjust to this crisis. It does seem to be a reasonable call, but I would go further and say that there needs to be a quid pro quo for Consumers. Whilst this crisis develops, airlines and travel companies should drop the mantra of ‘normal booking conditions apply’; they should also be open about ALL of the rights contained within Consumer Rights - the Consumer will respect and thank you for it.
But today, I want you to spare a thought for the Flybe aircrew and passengers, the airports that rely solely on that trade, the local economies, the support services for the airlines and other ancillary services; be in no doubt, there will be another Flybe; there will be another Thomas Cook.
Whether it is brexit, supporting the regions or coronavirus, we need a government that is not just truthful, but agile in thought and action. What we appear to have is a collection of people, locked in their dogma, defined by their narrow interests, with a view of the world, long since gone. I could be wrong, but I suspect there are many out there who at this moment in time would subscribe to this view and are probably very worried about their prospects in the future, not just for them but also their families; some of them will be Flybe families!
(This is the script text for Frank's latest CreatingRipples PodFilm™ - Flybe & The Coronavirus. If you wish to watch the view, you can view it here)