Blue Islands boss urges against open skies for Guernsey

Tuesday 19 June 2018

The man behind Blue Islands has written an open letter urging against changing air route licensing, while revealing he has personally invested more than £45million in his own airline.

Derek Coates said he shares the Committee for Economic Development’s "aspiration to drive and deliver sustainable economic development, growth and diversification," but he felt compelled to urge against an open skies policy.

Mr Coates' letter followed the release last week of the release of proposals for a new air licensing framework.

ED said the new framework, set out in a policy letter for consideration by the States Assembly at its meeting in July, "will provide a much clearer and simpler policy framework, which is intended to be the basis of introducing greater competition and new air routes." 

At the time, other airlines serving the islands; Aurigny and Waves responded positively, with both saying they would look at the proposals and consider what impact it may have on their business models, while Blue Islands said it would issue a statement in the coming days. That statement has now been issued in the form of a public, open letter, addressed to Deputy Charles Parkinson, the President of ED.

Mr Coates wrote that "as a long term, philanthropic, supporter of our local economy, I entirely share the Committee for Economic Development’s (the Committee’s) aspiration to drive and deliver sustainable economic development, growth and diversification. I feel compelled however to urge reconsideration of the proposals detailed in the above referenced paper of 11 June 2018 in respect of air route licensing."

He believes the proposed changes would be "both highly perilous and destructive to Guernsey's future airlinks and their sustainability."

Pictured: A former Rockhopper plane which served the islands

Mr Coates knows more about Guernsey's airlines and their sustainability than most, having set up Blue Islands, previously known as Rockhopper during the previous decade. Since 2004, he said he has continually invested in developing and evolving the Blue Islands airline business from its early days as an Alderney based operator which had two Islander / Trislander aircraft, to the current operating model with five ATRs with a capacity of around 580,000 seats per annum across a number of routes, to and from the Channel Islands.

The businessman said running Blue Islands has required in excess of £45million of personal investment from him, which he said is "well outside the context of a typical investors rational investment criteria." 

Having done this because he wants Guernsey's economy to prosper, Mr Coates said some of the Blue Islands routes his staff have introduced have ceased to operate, including to Paris, Geneva, Zurich and Amsterdam, because the Bailiwick's incoming tourism industry "could not sustain these operations and the outbound travel requirements of our communities were just too small to warrant these routes."

Mr Coates said any airlines which come into the local market based on an open skies policy would not have the same aspirations for it, adding that Blue Islands bases its entire fleet "exclusively in the Channel Islands, providing the greatest level of operational resilience in times of inclement weather disruption" along with offering employment to around 100 locally based individuals. He asked in his letter; "would newcomers do the same?"

Pictured: Derek Coates (Image from Healthspan website)

Through his letter, Mr Coates has raised a number of concerns regarding an open skies policy and has given examples of why he doesn't think it will work, and what he thinks could be done to benefit Guernsey's economy instead.

He argued that "in sub-scale markets, such as the majority of those to and from Guernsey, unfettered competition is not in the best interest of customers or the economies that air services connect," adding that he believes "our current route licensing structure, with requirements on licence holders to operate sufficient flights to sustain frequency of service, is the best way to safeguard the islands’ connectivity."

He explained that roughly a third of seats operated to and from Guernsey are empty, which, while demonstrating the "commitment of the current operators to ensure a level of schedule frequency and service level above purely commercial considerations", also demonstrates the risks if we fall foul of "the law of unintended consequences."

Pictured: A Blue Islands plane following the agreement of the airline's franchise deal with Flybe

Writing to Deputy Parkinson directly, Mr Coates has warned that there a number of "potential contra-implications of an open skies policy" which he said are clearly demonstrated in recent changes on the Guernsey to Jersey market, which has impacted on passengers booked to travel with Waves, which is currently without an airplane while its is out for maintenance.

Blue Islands had applied for a variation to its own licence "to remove any minimum frequency or capacity requirements, in order that it can reduce its own flying to compensate for the lost revenue caused by Waves’ entry to the market," but Waves is not subject to those same conditions - which Mr Coates said "fully demonstrates the risk of an “open skies” approach."

The Review which Mr Coates has responded to, proposes that only Gatwick and Alderney will continue to be licenced, which he said he can understand, being that the tax payer supports Aurigny. However, he wrote that "this approach serves only to undermine the number of sustainable, year-round regional services, operated by any carrier."

He has urged efforts to reconsider the open skies policy explaining that Jersey's model cannot be replicated in our Bailiwick due to our sister island's far larger population. Mr Coates also does not believe that extending Guernsey's runway will encourage more visitors to come to the Bailiwick, and is suggesting more work is done to improve and enhance Guernsey's tourism offerings and bedstock.

Pictured: Deputy Charles Parkinson

Mr Coates letter ends with a final plea for Guernsey to not adopt an open skies policy. He wrote:

"I urge you to consider the likely contra-implications I am raising here as a local resident, investor and supporter of Guernsey PLC, and revisit the recommendations.  It is vital that we work together to deliver tangible and sustainable economic growth, avoiding the unintended consequences of inadequately appraised structural change."

Mr Coates is offering instead to work with the ED Committee on ways of enhancing the island's transport links and said, "my team and I would welcome the opportunity to make further representations to your committee at the earliest possible convenience to avoid a future nightmare scenario for Guernsey."

Express has approached Deputy Parkinson and the Committee for Economic Development for a response.

You can read Mr Coates letter in full here: Derek Coates open letter to Deputy Charles Parkinson