Contributor - Europe

Cathy Buyck

UK regional airline Flybe stopped all flights and entered administration Thursday morning, marking yet another airline bankruptcy in the country—the fourth since 2017—and across Europe. Flybe’s collapse comes not unexpected as the company struggled financially for some time despite several restructuring efforts, a 2019 takeover by the Connect Airways consortium—led by Virgin Atlantic, aviation and civil engineering firm Stobart Group, and investment firm Cyrus Capital Partners—and <a href="https://www.ainonline.com/aviation-news/air-transport/2020-01-14/flybe-reaches-rescue-deal-uk-government">a much-publicized rescue attempt</a> involving the UK government in January. According to Flybe CEO Mark Anderson, the “significant” drop in bookings due to the outbreak of coronavirus compounded the company's funding challenges, forcing its collapse into administration.

 


“The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people, and businesses across the entire nation,” Anderson noted. Flybe operated 68 aircraft—54 De Havilland Dash 8-400s, three Embraer E195s, nine E175s, and two ATR 72s—on a network spanning 71 airports across the UK and Europe. It carried some 8 million passengers a year.

 


“Flybe's financial difficulties were longstanding and well documented and pre-date the outbreak of Covid-19,” a government spokesperson said in a statement. “[We are] urgently working to identify how key routes can be re-established by other airlines as soon as possible.” The statement made no mention of the Flybe rescue package over which the government consulted with the struggling airline in January, including deferral of airline passenger duty (APD) payments and a promise to reconsider levels of duty, as well as a possible loan. Although it appears doubtful it ever implemented the rescue package, the government on Thursday indicated its review of the country’s regional connectivity and ADP continues.

 


The collapse of Flybe prompted Airline UK chief executive Tim Alderslade to call on the government to “get rid of the double domestic APD anomaly” in its budget, due next week. The head of the UK airline lobbying body urged the government to use the right policy levers, including lowering ADP, to support a sector “going through an incredibly tough period with the Coronavirus hitting bookings and dampening demand.”

 


Unions slammed the government for allowing the airline to fail. “It is simply outrageous that the government has not learned the lessons following Monarch and Thomas Cook's collapses, the much-promised airline insolvency review has still not materialized,” commented Unite national officer Oliver Richardson. “The UK economy&nbsp;is highly dependent on a viable and supported regional airline and airport network.&nbsp;For the central government not to support and nurture this, especially as we deal with the twin uncertainties of the Covid-19 virus and Brexit, is unhelpful and irresponsible.”

 


Michael Mulligan, insolvency partner at law firm&nbsp;Shakespeare Martineau, warned more companies will follow.&nbsp;“Whilst the impact of the coronavirus outbreak on demand for air travel was only partly to blame for its collapse, it is clear that the industry is going to take a savage hit in the coming weeks and months. The end of the line for another troubled European operator, Alitalia, is rumored,” he said.

 


Speaking at a recent aviation summit organized by Brussels-based trade association Airlines for Europe (A4E), the heads of Europe’s largest airlines asserted the rapid spread of the coronavirus and the fall-off in demand will trigger another wave of airline bankruptcies.&nbsp; “Most definitely I believe this will accelerate consolidation,” Air France KLM CEO Ben Smith said. There are “quite a few weak” carriers in Asia but also in Europe, he added. Smith pointed specifically to France, where two airlines failed last year, before the corona outbreak.

 


Flybe’s collapse comes as the International Air Transport Association (IATA) raised it outlook of the anticipated damage of Covid-19 to airlines’ revenues. Airlines could lose $63 billion to $113 billion in revenue for passenger traffic globally in 2020, depending on how the coronavirus spreads, according to IATA. On February 20, IATA estimated the outbreak would cost carriers $29.3 billion in revenue.

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