Flybe

Statement

My Lords, with permission, I will now repeat a Statement made in the House of Commons by the Minister for Aviation earlier today. The Statement is as follows:

“With your permission, Mr Speaker, I would like to make a Statement about the collapse of Flybe. In the early hours of this morning, Flybe ceased trading. This was a commercial decision by the company, and Flybe has filed for insolvency. UK airports handled 9.5 million Flybe passengers in 2018, with 80% of these travelling within the UK. An estimated 15,000 passengers were due to fly today, so our immediate priority is to support passengers travelling home and employees who have lost their jobs. Flybe has had a challenging year in terms of its financial performance, with a decline in bookings and increased competition.

Levelling up connectivity across our regions and nations is a top priority for this Government. We are driving forward HS2 and Northern Powerhouse Rail, we have announced a £5 billion funding package for bus and cycle links, and we are investing £6.6 billion to improve the condition of local highway networks between 2015 and 2021. We are undertaking a review of regional connectivity to ensure that the UK has the domestic transport connections that local communities rely on, including regional airports. The Treasury is also reviewing air passenger duty—APD—to ensure that regional connectivity is supported while meeting the UK’s climate change commitments to meet net zero by 2050.

These measures featured in conversations with Flybe back in January, and in turn it agreed to continue operating. Since then, we have been working tirelessly to explore multiple options with Flybe’s shareholders to find a solution. Flybe outlined that problems with its business have been compounded by the outbreak of coronavirus, which in the last few days has resulted in a significant impact on demand. The directors therefore decided that it was not viable to keep Flybe operating. Unfortunately, in a competitive market companies do fail. It is not the role of government to prop them up.

Given the time of year, the nature of Flybe’s business and fleet and the routes it flies, sufficient alternative transport arrangements should be available, with other airlines or by road and rail. The number of passengers abroad is small and is further reduced as a result of coronavirus. For those passengers who are abroad, there is sufficient capacity on other commercial airlines to return to the UK. The Civil Aviation Authority and the Secretary of State are encouraging these airlines to offer rescue fares, and this is already happening. I would like to thank those, including easyJet, which has today announced that it will offer Flybe passengers a dedicated rescue fare up to the end of May.

We are working with bus and rail operators to support Flybe passengers in getting to their destination, and I am extremely grateful that the Rail Delivery Group has this morning confirmed that all operators are offering free travel to Flybe staff and passengers for a week, free of charge.

For passengers due to fly with Flybe in the next few days, I would ask that they do not turn up at the airport. They should instead please look at the website set up by the Civil Aviation Authority and talk to their travel agents, travel insurance providers and credit card companies. For those who do arrive at UK airports today, we are making government representatives available to offer support and provide information to passengers affected.

I would like to express my sincere sympathy to those who have lost their jobs as a result of this failure. This will include crew, engineers, technicians, staff at Flybe headquarters in Exeter, and others. We understand that this must be a very worrying time for workers and their families. The Department for Work and Pensions stands ready to support anyone affected by the closure with its rapid response service offer. This will be available to all those affected through local Jobcentre Plus outlets. Additionally, in the event of any redundancies, there are special arrangements for employees who are owed redundancy pay and other payments by their insolvent employer. The redundancy payments service in the Insolvency Service can pay certain amounts owed to the former employees from the National Insurance Fund. I will work with my ministerial colleagues to ensure that any redundancy payments are paid to affected employees as soon as possible.

We recognise the impact that this will have on UK airports, particularly those which have large-scale Flybe operations. Government stands ready to support this sector, and I have full confidence that it will respond as effectively as it always has. We are urgently working with industry to identify opportunities to fill routes and I have spoken to airlines today to emphasise this. Globally, aviation is facing challenges due to the impact of coronavirus. The Government are well prepared for this, and as the wider economic picture becomes clearer, the Chancellor has said that he stands ready to announce further support where needed. I will be chairing a round table with members of the aviation industry next week to discuss the issues presented by coronavirus.

I would like to take this opportunity to thank passengers for their patience and make known my appreciation for the work undertaken by everyone who has again stepped up to ensure that passengers and local communities are supported. We will continue to work across government to ensure that both passengers and staff are able to access the information and services they require at this sad and challenging time.”

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating the Statement. This collapse could have very serious consequences, not just for those currently stranded here or abroad; not just for employees—the ground staff at airports as well as direct employees—and not even just for the insurance industry. This collapse has longer-term consequences, particularly for our regions, heavily reliant on connectivity for employment, tourism and travel. I need hardly say that with the almost certain economic impact of coronavirus and travel changes after 31 December, the loss of a major transport link could have particularly serious consequences.

Any attempt to blame this collapse on the coronavirus will not wash. Transport experts had been warning about the state of this company well before the first cough, and the Government must explain why a proper plan was not in place before recent events. We have been here before with passengers affected by the collapse of Monarch and Thomas Cook. This case is worse for some, with fewer passengers travelling on packages and therefore not necessarily ATOL-protected. We welcome what is being done in the short term to get passengers home, but there is also the loss of holidays and other associated costs. Can the Minister spell out the plans to assist those passengers beyond mere transport? Also, how does the Government plan to re-establish trust in the industry, which is taking a serious hit? Given that the CAA has sustained funding cuts under this Government, can the Minister confirm whether any additional financial support will be provided to enable it to support passengers following Flybe’s collapse?

The impact of this on the regions and nations of the UK cannot be overestimated: 80% of flights at Belfast City Airport are operated by Flybe, 95% at Southampton, 50% at Humberside and at Wick, and 100% at Anglesey, with 30 other airports affected. Many of these provide critical connectivity, often where there is no realistic alternative to flying. Indeed, some of these smaller airports might now themselves be at risk. The impact on small businesses could be devastating. Can the Minister outline the support that will be made available to communities, and could she confirm that the Government will meet urgently with local authority representatives and airport operators to agree a package of central government help?

My Lords, I thank the Minister for the Statement, which comes at a time of huge concern in the aviation industry. When Flybe first publicly hit problems a couple of months ago, the Government wildly overpromised the help that was on offer, or potentially on offer. It turns out that virtually none of that help was possible, partly because of the concern in the rest of the aviation industry about fair competition but also because the Government, for one reason or another, have not been able to offer money on reasonable terms to the company.

All the grand schemes in the world will not help the people who are losing their jobs today or who are being cut off from the regular routes that they use which are important either to their families or to their businesses. In this Statement the Government repeat some of these grand, long-term promises—but, to be fair, that is actually irrelevant at this time.

On competitive market companies that fail, the Statement is really surprising, given the Government’s response couple of months ago. It says:

“It is not the role of government to prop them up.”

But two months ago, the Government were offering assistance that effectively was promising to do that. Shape shifting will not help the market. What help, if any, did the Government, in the end, provide to Flybe? Was Flybe able to defer the payment of any taxes, or was that not possible?

Beyond the concerns for Flybe employees and the passengers who have paid money for flights, amply outlined by the noble Baroness, Lady Hayter, there will be a very serious knock-on effect at smaller regional airports in the UK. Some of those airports could also find they cannot continue operating. The Statement says:

“Government stands ready to support this sector.”

Look at the time. This is a Statement, not a debate.

The two Opposition Front Benches are allowed 10 minutes, and I would like to finish what I am saying. Coronavirus will tip other transport operators into difficulties as well. Especially at this time, when we are expecting a large number of people to need healthcare, I ask the Government what measures they are putting in place to help the transportation of NHS patients from the Isle of Man to hospitals in Liverpool, which is a role that Flybe has undertaken up to now. This is a very specific concern.

I thank both Front-Benchers for their contributions; a number of very important issues were raised, some of which I can agree with and some of which I probably cannot. I think that all noble Lords will agree that the loss of Flybe is a significant hit to regional connectivity, and we must work with the regions to make sure that people are able to get to where they need to go. I am a little concerned that there seems to be much focus on regional connectivity and just air travel, but there are several ways of travelling from the regions. The noble Baroness, Lady Hayter, mentioned the south-west. The south-west does have trains and does have coaches; there are other ways to travel. The Government are undertaking a review of regional connectivity which will focus on aviation but will cover all modes of transport to understand exactly how the regions can interconnect.

There are two things—this was raised also by the noble Baroness, Lady Randerson—about connectivity. It is not enough to get connectivity between airports; we must also make sure that there is good access to the airports and the train stations. Of course, this is all top of mind within my department.

The noble Baroness, Lady Hayter, mentioned the passengers who have booked flights, and whether they will be able to get their money back. This is a private sector company, and it concerns all of us that some people may not have adequate protection. This will once again highlight, as other failures have in the past, the importance of having insurance. Some passengers will have ATOL cover. Others who have paid by credit card may be able to get their money back under Section 75 of the Consumer Credit Act. Some passengers may be able to claim a refund by applying for chargeback, if they paid by debit card. Passengers can seek additional information and advice from Citizens Advice or Advice Direct Scotland.

My Lords—

My Lords—

My Lords, there will be plenty of time for Back-Bench questions, and I urge noble Lords to keep them short.

My Lords, the Minister referred to alternative bus and rail routes. As has already been mentioned, 90% of the flights from Belfast City Airport are by Flybe. Northern Ireland has no bridge or canal link with Britain. Will the Minister bring to the Chancellor of the Exchequer’s attention before the Budget the need to abandon air passenger duty on flights from Northern Ireland?

The noble Lord raises an interesting point. Air passenger duty is under review by Her Majesty’s Treasury, as indeed are all taxes. The Conservative manifesto set out our commitment to consider the devolution of short-haul APD in Northern Ireland. We will work with the restored Executive to consider any proposals submitted for the devolution of short-haul APD. This builds on our recent call for evidence and our work with a technical working group that we have established to look into the operational and possible legal challenges around the devolution of short-haul APD.

My Lords, our deep concern in Northern Ireland is very much Belfast City Airport. The company operates 14 scheduled flights out of Belfast, carrying 80% of all scheduled passengers out of Belfast and 1.6 million passengers from Belfast to destinations across the United Kingdom. This is very serious economically for Belfast City Airport and will be a devastating blow. Do the Government have any plans to engage with the Northern Ireland Assembly, the First Minister or the Economy Minister in the Assembly to try to find alternative operators for the routes that have all now been abandoned?

The Government are working extremely hard to find replacement operators for as many routes as possible. We are confident and have already this morning had proactive responses from various airlines about picking up routes. Returning to the question of the Isle of Man, which is serviced by British Airways and easyJet at the moment, the Isle of Man Department of Infrastructure is looking at contingency plans to replace the medical link previously provided by Flybe.

My Lords, several years ago the Government agreed a PSO for the service between Newquay and London, as other noble Lords have said. That means guaranteeing four flights a day, in my book. What will the Government do now to find another operator? How long will that take? It is easy to say that there is a train and a bus—you can even cycle, I suppose—but the Government agreed this PSO because they thought it necessary.