'It's our duty to use tax payers money wisely' - Parkinson on funding Flybe

Monday 25 February 2019

Economic Development's President has defended their decision to back Flybe in making a new air link with Heathrow, saying the offer was "significantly cheaper, more resilient, and more likely to help us achieve our investment objectives".

Deputy Charles Parkinson has issued a list of six reasons explaining why Economic Development are supporting Flybe, after the committee came under the microscope for choosing the private airline over Aurigny, the States owned competitor.

Economic Development are giving Flybe an £825,000 subsidy, broken into a £678,000 investment and a £147,000 discount to land at the airport. But soon after this new connection was announced last week, Aurigny, the airline owned by the States of Guernsey, said it had applied for a similar subsidy towards the end of last year when it was looking at flying to Heathrow. This was turned down, meaning Aurigny's planned Heathrow service never took off. The company was left scratching its head last week when it found out its competitor was receiving the support of its owners.

Now it has been made clear by Deputy Parkinson that the deal presented to his committee by Flybe was much more 'appealing', 'economically sound', and less of a risk for the island to take.

The reasons given by Deputy Parkinson were as follows: 

1. Aurigny's initial assessment of the support necessary to cover the net cost of operating a 12 month service to Heathrow was around £2 million – which is about £167,000 per month.  For comparison, the support we have agreed to give Flybe amounts to £825,000 for seven months, which is about £118,000 per month.  This means that we are able to test the Heathrow market at considerably less expense with the Flybe offer.
2. Aurigny does not have any code share agreements with any other airline, whereas Flybe has a variety of code share agreements.  Flybe is joining the Amadeus Central Reservation System, which will further enhance the visibility of its flights.
3. Aurigny has no ground handling operations at Heathrow, whereas Flybe has an existing base at Heathrow Terminal 3.  Inevitably, the start-up costs for a new route (which may be temporary) for Aurigny would be much higher than those for Flybe.
4. Aurigny has only one aircraft which would be permitted to operate into Heathrow, and that is currently fully committed to the Gatwick route.  While Aurigny could redeploy its assets to free up its Embraer 195 jet for a Heathrow rotation, the airline would have no back-up planes if the Embraer 195 was unexpectedly out of service.  All of the planes in Flybe’s fleet can operate into Heathrow.
5. Although the Embraer 195 offers more seats than the Dash 8 Q400 that Flybe proposes to use, we do not know what the demand will be on this new route.  If the demand is higher than expected, Flybe have Embraer jets in their fleet (both 195s and 175s) with which to expand the capacity on the route.  In the meantime, the much cheaper Dash 8 Q400 is a lower risk option.
6. In terms of indirect economic benefits, obviously any spend by any airline at Heathrow will benefit the UK economy.  As it happens, Aurigny is Flybe’s handling agent in Guernsey, so whichever of these two airlines was selected, the same staff would be employed on the ground in Guernsey. It is impossible to know where the pilots might be resident, or where fuel might be uploaded, so the main point of difference between the airlines would be their administration. Here, it is clear that an investment in Aurigny would provide a greater benefit to Guernsey than an investment in Flybe.  But the percentage of the total funding which would be applied to administration would be quite small.

Deputy Parkinson said: "In short, the Flybe offer was significantly cheaper, more resilient and more likely to help us achieve our investment objectives.  We would only damage our economic prospects if we gave preference to Aurigny in all cases, regardless of the merits of any competing bids.

“We rarely give route development support on any route, beyond the standard discounts against landing fees offered by Guernsey airport.  In fact, of the seven new routes opened up since the adoption of our ‘Quasi Open Skies’ policy last September [Edinburgh, Bournemouth, Liverpool, Southend, Newquay, Groningen and Heathrow], Heathrow is the only one that we have supported in this way.

“We are custodians of taxpayers’ money, and it is our duty to use it wisely.”