What would Flybe collapse mean for the United Kingdom?

Reports and rumors about the financial difficulties at the British regional carrier Flybe prompted some interesting reactions. Some were questioning why was this happening, as just a few months ago, Virgin Atlantic-led consortium Connect Airways announced a rebranding of the carrier to Virgin Connect to better align with the Virgin family. Others were questioning whether the British government should be involved in rescuing the allegedly ailing airline as Flybe is crucial to regional connectivity within the United Kingdom.

International Airlines Group (IAG), meanwhile, complained directly to the European Union regarding the state aid to the struggling company.

British Airlines Pilots Association (BALPA) was “appalled” that talks were held behind closed doors without involving the people working at the airline. BALPA further added that Flybe “plays an incredibly important role connecting the regions and nations of the UK and onwards to Europe” and if it were to close its doors, a new Flybe would have to be invented, stated the pilot union.

Nevertheless, the company lives on to see another day. On January 14, 2020, the British Government announced official measures “to support and enhance regional connectivity across the UK,” according to press release by Her Majesty’s Treasury. Measures include looking at the Air Passenger Duty (APD) tax, which taxes each economy class passenger departing from British airports $16.9 (£13), meaning a domestic passenger pays twice the sum, putting a heavy burden on Flybe’s competitiveness against other means of travel. Another move to save the regional carrier would be to defer a $130 million (£100 million) tax bill for up to three years, allowing the company to restructure its business and avoid potential downturns in the future.

But why is Flybe so important to the United Kingdom and its connectivity? How come with the backing of Virgin Atlantic, the carrier is struggling once again? And finally, what are some of the factors that might have led to the potential demise of the regional airline?

Flybe connections around the United Kingdom

Flybe’s main role is connecting some of the smaller airports on the British Isles to hubs and bigger cities in Europe, including the UK’s own London-Heathrow (LHR) or Manchester Airport (MAN), for example.

Exeter Airport (EXT) is one of the carrier’s bases, where Flybe currently accounts for 70% of total traffic. The regional carrier is the only airline serving such cities as Amsterdam (AMS), Paris-Charles De Gaulle (CDG) and Manchester (MAN). Most of the other destinations, served by other airlines during the winter schedule, including Ryanair and TUI Airways, are leisure destinations. In 2019, Exeter Airport saw 934,000 passengers crossing its gates, according to the UK’s Civil Aviation Authority (CAA) data as of November 30, 2019.

Another example is Belfast (BHD), where Flybe is one of only five airlines serving the airport with a 66% market share. The 3 million passenger airport, named after George Best, would potentially lose flights to Birmingham (BHX), London-City (LCY) and Manchester (MAN). The three named cities are also some of the most popular routes out of Belfast (BHD), making up for a total of 40.4% weekly flights out of the Northern Irish capital.

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