Hello and welcome to the London Air Travel’s Monday Briefing for the week beginning 20 January 2020.
The news over the past week has of course been dominated by the financial difficulties of Flybe.
Who knows what will be the ultimate fate of the airline, but it can be said with confidence that this story will run and run. It could well end with some high profile figures appearing before a Transport Select Committee hearing.
There are a lot of multi-faceted aspects as to how Flybe got here. There are also a lot of vested interests in its ultimate fate.
It’s worth recalling that the original sale of Flybe to the Connect Airways Consortium comprising Cyrus Capital Partners, Stobart Air and Virgin Atlantic was highly controversial. The need for approval from Flybe’s public shareholders was circumvented by structuring the sale of the airline as a sale of its assets, thus wiping out any remaining shareholder value. When Flybe floated on the stock exchange in 2010, it was valued at some £250m. The urgency of the sale was seen as critical to securing the airline’s future.
Flybe has now secured what is known as a “Time To Pay” arrangement with the UK’s tax authority HM Revenue & Customs in respect of an outstanding liability of Air Passenger Duty of approximately £10m. This is a common arrangement used by businesses in financial distress.
The Government has also promised to look at the levying of Air Passenger Duty on domestic flights. Airlines have spent years lobbying against Air Passenger Duty to no avail. The Treasury, which is no stranger to complaints and lobbying from industry groups, will at best come up with a fudge that is revenue neutral.
Flybe is also in discussions with the UK Government about securing a short-term loan on commercial terms.
Flybe’s rivals are furious. IAG, whose slots are being used by Flybe at London Heathrow, has submitted a complaint to the European Union alleging that Flybe is in receipt of state aid. Should Flybe be seen to receive any special treatment from the UK Government, its rivals could well also seek a judicial review.
They can argue, with some justification, that Flybe’s financial problems were well documented before its current owners bought the airline. The Connect Airways consortium had ample opportunity to do a full due diligence.
Virgin has an uncanny ability to keep its head down when trouble is brewing. However, assuming the rebranding to Virgin Connect ultimately goes ahead, it will not be able to avoid scrutiny.
Managing an airline with multiple shareholders is hard enough. With its shareholders having different interests – Virgin wants Flybe to feed its operations at Heathrow and Manchester and Stobart Air wants it to grow Southend airport (which it owns) – turning around Flybe is not going to be easy.
Fleet & Route News
Staying with Flybe, the airline has confirmed that is to transfer its route from London to Newquay back from Heathrow to Gatwick from Sunday 29 March 2020.
The route had operated from Heathrow for one year and was hailed at the time as vital for connectivity for Newquay. As a Public Service Obligation route Flybe did receive additional public funding for the route on its transfer to Heathrow. Flybe appears to have assuaged Cornwall airport by adding a route to Amsterdam and increasing capacity to Edinburgh and Manchester.
China Southern is also launching a new route from London Heathrow to Beijing Daxing airport with the Airbus A380 aircraft from Thursday 18 June 2020. The airline is also suspending London Heathrow – Sanya, and reducing capacity on London Heathrow – Guangzhou.
On fleet, British Airways retired one of its earliest Boeing 777-200 aircraft (registration G-ZZZC) last week – the first of three Boeing 777-200 aircraft to be retired this year.
BA is also temporarily operating short-haul configured Airbus A321neo aircraft in place of its mid-haul Airbus A321 aircraft on selected flights from London Heathrow to Amman, Beirut, Moscow Domodedovo and Moscow Sheremetyevo airports until mid March 2020. Passengers ticketed in Club World are entitled to change to an alternative flight or claim a partial refund.
South African Airways has also announced it has put up its fleet of 5 Airbus A340-300 and 4 Airbus A340-600 aircraft up for sale. The tender process will close on Thursday 30 January 2020.
Also of note this week:
Aer Lingus has “refreshed” its staff uniform. (Aer Lingus)
According to minutes of the latest meeting of the Manchester Airport Consultative Committee, the extension to Manchester Airport Terminal 2 is due to be handed over to the airport on Friday 6 March 2020, with live operations due to begin on Wednesday 1 July 2020 before opening fully in November 2020.
Late post publication updates:
[Reserved for updates throughout the day]
South African Airways has issued the following statement in response to press speculation:
South African Airways (SAA) wishes to assure its customers and stakeholders that flights to all its destinations continue as normal.
The airline is aware of media reports suggesting that it will cease operations.
SAA is always committed to transparently communicate with all stakeholders, including customers, about any material or significant operational changes that may have an impact on flight schedules.
Where there may be flight schedule amendments, such operational changes will be managed and communicated in accordance with the industry norms and practices.