Flybe drops out of sky citing Coronavirus burden

10 March 2020 Consultancy.uk

Airlines around the world were already facing major turbulence before 2020, as declining revenues and stagnant demand had seen a steep increase in the number of the sector’s players falling into administration. Now, as is said to be the case with collapsed UK airline Flybe, the sector faces added pressure from the threat of the global Covid-19 outbreak.

Since the economic shock of 2011 – an echo of the 2008 financial crisis – the number of commercial airlines falling into administration across the world declined at a relatively consistent rate. According to data from ProtectMyHoliday.com – barring an anomaly of a year which saw only four airlines falter in 2014 – the number of collapses in the sector declined continuously. In 2017, the figure stood at just 10, compared to a huge 46 in 2011, and a staggering 61 in 2008.

Following the now infamous 2017 collapse of Monarch – which necessitated the largest peacetime repatriation in British history of an estimated 110,000 customers left stranded overseas – however, the situation once more seems to have commenced a nose-dive in the following year. 15 airlines failed in 2018, and the crisis deepened over 2019, with the likes of Flymbi and Thomas Cook (which took Monarch’s unwanted crown for repatriation, having left 600,000 travellers marooned overseas) seeing 33 carriers fail over the course of the year – as reported by AllPlane.TV.

Global number of airlines to have failed since 2005

2020 does not look likely to reverse the terminal decline of many airlines. With the threat of Covid-19 putting paid to many people’s travel plans in the near future, companies are set to struggle throughout the year. This proved to be the case of UK firm Flybe, which operated about 75 aircraft and served more than 80 airports across Britain and Europe, but had been struggling with a decline in bookings for some time. The additional dent in bookings relating to the global Coronavirus outbreak seems to be the straw which broke the camel’s back, according to the firm’s leadership.

A letter to staff from Flybe CEO Mark Anderson stated that “the Coronavirus has impacted both our shareholders and ourselves and has put additional pressure on an already difficult situation.” Anderson also told staff that “despite your hard work, commitment and some amazing results which we have delivered, and have been achieving up to the last day of operation… we have come to the end of the road."

Speaking about a proposed deal to bail out the firm, Anderson added, “While our shareholders and the Leadership Team have worked with the Government and key suppliers to try to get the funding and support needed, this has not materialised… I am very sorry that we have not been able to secure the funding needed to continue to deliver our turnaround plan.”

Flybe was Europe’s largest regional airline, and its collapse into administration has already seen the loss of more than 2,000 jobs. Alan Hudson, Joanne Robinson, Lucy Winterborne and Simon Edel of EY have been appointed as joint administrators, and since then a statement from the Big Four firm has similarly referred to Coronavirus in its statement, as it flagged “added pressures” on the travel industry in recent weeks, suggesting that it made Flybe’s precarious financial situation worse.

“Broken promises”

The reasoning behind Flybe’s downfall has not been universally accepted, however. The British Airline Pilots’ Association has since hit out at the Government and Connect Airways – a consortium of Virgin Atlantic, Stobart Air and the hedge fund Cyrus Capital which purchased Flybe little over a year ago – for the collapse. Having struggles with losses of about £20 million every year before the Connect takeover, it had been the subject of stringent cost-cutting plans and redundancies since.

British Pilots’ Association General Secretary Brian Strutton said, “Six weeks ago, when the ownership consortium lost confidence, the Government promised a rescue package, apparently at that time recognising the value of Flybe to the regional economy of the UK… Throughout, pilots, cabin crew and ground staff have done their jobs brilliantly, while behind the scenes the owners and, sadly, Government connived to walk away. Flybe staff will feel disgusted at this betrayal and these broken promises.”

In this case, the Civil Aviation Authority will not be operating a repatriation programme for any stranded customers in Europe. The organisation said passengers should make their own alternative travel arrangements via other airlines, rail or coach operators.


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