Flybe’s latest crisis is sending it into a death spiral it may not get out of.
As soon as reporting begins and the news gets out, ticket sales collapse – as they did yesterday. That cash is crucial to the airline to keep itself in the legally required 30 days operating cash bracket. If it drops below that the CAA has to give permission for the airline to keep flying. So every day tickets don’t get sold, that day gets nearer faster.
The cause of the problem this time is Government taxes. The Airport Departure Tax collected by airlines at the time you pay for your ticket has to be paid and Flybe’s bill is said to be £100 million.
One solution proposed by the government is to cut APD on all domestic routes in the U.K. so that it doesn’t look like state aid but helps Flybe by removing the tax.
The government is being asked to suspend that bill until 2023, but when it comes to taxation, few governments ever give any leeway because they don’t want to set a precedent.
Not only that but come 2023 they have no guarantee it will ever get paid and more will be due.
The problem for the government is that Flybe operates PSR’s – public service routes to parts of the country that would have no viable air service without them, and which government subsidises.
Another cash-crunching issue has been the credit card companies keeping a higher percentage of airline ticket buys – because so many airlines have collapsed card companies have to pay back customers for tickets purchased using their cards, because legally the card company owns them and is the supplier. Costs have mounted following Monarch and Thomas Cook’s failure.
Meanwhile pilots union BALPA is screaming over being uninformed and left out, never mind the cabin crews and staff in Exeter who will be affected. Some 2000 staff and another 1400 outside the airline could be affected if it collapses.