The Corona virus claimed its first corporate casualty in the aviation world as one of the UK’s largest regional carriers Flybe, ceased trading. A statement released by the airline claimed that passengers intending to travel should not leave their home as all flights had been grounded. Flybe was considered a crucial link in the UK’s transport system, on average, over the past 3 years it served just under nine million passengers. Flybe’s troubles however, started months prior to Covid-19.
Over the past year Flybe found itself in financial turmoil whereby recovery seemed difficult.The end seemed to be in sight for the struggling carrier but a slice of fortune led to it being rescued by Virgin, Stobart and Cyrus capital; the three businesses operating under Connect Airways. Although this seemed like a fairy tale ending, the airline still failed to make ends meet. Rumour had it that the government was devising a plan to bailout Flybe but was dogged by potential legal battles from other carriers, alleging such a bailout would be unfair and fall foul of european competition law. Furthermore, the impact that ‘Brexit’ had on the UK economy was far from ideal, the value of the Sterling to the Dollar had considerably dropped, a problem when revenue is in Sterling but costs are in the Dollar.
Flybe’s USP was the fact that it served remote communities, a service other airlines are reluctant to commit resources to, as profit margins are next to nothing for these routes. In addition the carrier urged the UK government to reduce Air Passenger Duty tax. APD was introduced during the 1990’s era of aviation, it puts a fee on flights operating within the UK. The concept behind the tax is ‘polluters pay principle’ which in this context can be defined as passengers who travel via air should pay a penalty for the environmental pollution caused. The original fee was £5 but has now risen to £13 each way. Since Flybe’s modus operandi was to serve as a regional carrier within the UK, the tax imposed cost them severely.
“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.”. With the airline already having long standing financial difficulties Covid-19 has proved to be the final nail in the coffin. Flybe was responsible for “nearly 40% of UK domestic flights,” this will be a large blow to those passengers who relied on the domestic carrier for travel.
The effects of Covid-19 on airlines is becoming more apparent as passenger demand continues to plummet. Airlines may have to gain financial aid from governments or deter payments to lenders in order to stay afloat. Unfortunately, the virus has shown minimal signs of ‘letting up’ and given the current state of aviation there may be more airlines ceasing operation.
Virgin (2020) ‘Flybe ceases trading’, p. 1. Available at: https://flywith.virginatlantic.com/gb/en/news/flybe-ceases-trading.html.
Calder, S.(2020) ‘FLYBE URGES GOVERNMENT TO CONSIDER AIR PASSENGER DUTY TAX CUT TO KEEP AIRLINE FLYING’, Indepe, p. 1. Available at: https://www.independent.co.uk/travel/news-and-advice/flybe-news-collapse-latest-financial-failure-air-passenger-duty-virgin-atlantic-a9282576.html.
Kirka, D.(2020) ‘UK airline Flybe collapses as virus hits weakened company’, APNews, p. 1. Available at: https://apnews.com/b59aadf5e2559a55ffb73dc2429918bb.
Topham, G.(2020) ‘Flybe: airline collapses two months after government announces rescue’, The Guardian, p. 1. Available at: https://www.theguardian.com/business/2020/mar/05/flybe-collapses-two-months-after-government-announces-rescue.Statista
(no date) ‘Number of passengers uplifted by Flybe Ltd from 2008 to 2018’, p. 1. Available at: https://www.statista.com/statistics/309453/flybes-uk-passenger-numbers/.