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Flybe: what are the impacts of the airline’s administration?

5 March 2020: Flybe’s entry into administration is bad news for customers, employees, creditors, suppliers, and even other airlines. But what does it mean for the UK regions, the UK’s industrial strategy and the environment?

Coronavirus (COVID-19) has claimed a large corporate victim in Flybe, as the Exeter-based airline partially blamed its collapse on the outbreak. Customers due to fly are being told not to travel to the airport, while 2,000 jobs at the airline are at risk.

Flybe’s demise will have a significant impact on UK regional connectivity. Exeter Airport played host to Flybe, Southampton Airport was dominated by Flybe flights, while Birmingham and Manchester were also significant Flybe hubs. Other cities affected by the news include Aberdeen, Belfast, Edinburgh, Glasgow, Newquay, Inverness, the Isle of Man and Jersey.

Then there are non-UK ‘destination’ airports to consider, for which Flybe provided vital connections. All of that is lost until the gaps are gradually filled by other options, be they air, rail or road.

Regional airports have played a vital role in connecting the hinterland, not always with business-first decision-making taking the lead. Internationally, we have seen airport systems gradually being rationalised, especially where state support has been the only real lifeline, and communities have eventually been served by other means of transport. 

The hub and spoke system that has traditionally supported travel by air has brought business and ‘visiting family and friends’ passengers, as well as express freight, together into a rationalised air transportation network, but Flybe’s final departure is the latest indicator that this model is on the wane. 

No return to 1970s ‘bail out’ policies

What is the government’s role in all this? Iain Wright, ICAEW’s Director for Business and Industrial Strategy, says: “The fall of Flybe, so soon after government intervention, may call into question the Government’s new approach to industrial policy. That would be unwarranted. At its best, industrial strategy can see government and business taking the long-term view, addressing jointly the social, economic and environmental challenges we face to enhance our country’s competitive advantage and raise living standards for all. 

“Industrial policy lost favour in the 1970s because government was seen to be bad at picking winners and used taxpayers’ money to bail out failing industries. It is hoped that the Flybe example doesn’t bring back memories of the 1970s, but instead ushers in a debate as to how government and industry should collaborate to address the big challenges facing the UK.”

Moreover, perhaps there is now the impetus to rethink transportation by air around, to and from the UK. The entry of Flybe into administration is not the only factor contributing to a potential new way of thinking. 

The Court of Appeal’s decision on 27 February 2020 in the case R (Friends of the Earth) v Secretary of State for Transport and others has put into doubt a third runway at Heathrow Airport. The Court of Appeal ruled the government’s plans did not consider the UK’s commitments to reduce carbon emissions under the Paris agreement.

Chance to think more carefully

While airlines grapple with questions of capacity, there is also the new threat of Coronavirus to content with, forcing employers and individuals to think about the way they do business and live their lives.

Francesca Sharp, ICAEW’s Technical Lead Climate Change, says: “While for some the Coronavirus will present a temporary pause in usually busy travel schedules, it may also present an opportunity for businesses to think more carefully about when and why they travel.

“Adaptation to a zero-carbon world will see vast changes to the way business is done. As teams are told they are to stay put or work from home it’s likely that those businesses that are most resilient to Coronavirus may too be more resilient to climate change.”

For more information on climate risk, please visit our Climate Hub.