What this news means for other airlines

Today they finally succumbed as the Civil Aviation Authority announced that they’d entered administration placing over 2,000 direct jobs at risk and more in their supply chain.

Flybe Chief Executive Mark Anderson said the company had made every possible attempt to avoid collapse but had been unable to overcome significant funding challenges. 
“The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.”

What tipped the scales fundamentally against Flybe was the rapid emergence of the coronavirus Covid-19 and two specific consequences from that.

Firstly, lots of UK companies have been telling staff to work from home and cancel non-essential meetings. This undermined demand for their main business routes to european business centres like London, Manchester, Paris, Hannover and Geneva.

The increasing general anxiety about the coronavirus has also been catastrophic for holiday traffic. Two of their most popular routes went to Milan and Verona but as Italy implemented containment procedures like closing schools and banning crowds from sports fixtures, demand cratered.

Covid-19 grounds the airline industry

Chris Horner, Insolvency Director with BusinessRescueExpert said: “Flybe was purchased by a consortium in February last year for only £2.2m or less than 1p per share so it’s not a total surprise that they’ve been unable to turn business around in a year.

“Unlike Thomas Cook’s insolvency event which left a lot of passengers stranded abroad, Flybe is largely a domestic operator so there is no repatriation program. The majority of its domestic routes like Manchester to Glasgow or Birmingham to Edinburgh can be done on road or rail.

“We’ve previously spoken about the importance of SAFI (Scheduled Airline Failure Insurance) which protects the policyholder if their carrier goes into administration and the amazing fact that 48% of UK travel policies don’t include SAFI as standard.

“Bookings made on a credit card may also offer some level of protection but will need to be checked with the card provider.

“The Government is already looking at making changes to airline insolvency procedure and while this news will only increase the sense of urgency but we’d advise more haste, less speed.

“Keeping the fleet flying” is an understandable desire but an airline continuing to operate while insolvent raises a lot of issues – health and safety, financial and legal.

“The proposed plan for an airline insolvency insurance fund financed by passenger contributions via their tickets could be a balanced and sensible measure but the final details would be key.”

Help is at hand

Several other UK air and rail carriers are helping out stranded passengers. 
Ryanair has reduced fares to £19.99; Easyjet are offering reduced fares for passengers and free flights home for Flybe staff while British Airways have introduced Flybe rescue fares which are £50 all inclusive of all fees and checked baggage. They will also be flying Flybe staff for free. 

All of the UK’s train operators have agreed to provide free travel to Flybe staff and customers who are unable to travel over the following week. They should produce their proof of employment or journey to staff at their nearest station.

Robert Nisbet, director of nations and regions at the Rail Delivery Group said: “We know how distressing the news about Flybe is for their staff and customers, which is why train operators have arranged free travel to help them get to their destinations.”

Flybe is the second major British airline to go into administration within six months following the demise of Thomas Cook and might not be the last if the slump continues or worsens in the coming months. 

Businesses with underlying weaknesses need to look at mending their defences as soon as they can rather than hoping that they won’t be exposed by a black swan event like a pandemic or a disaster.

Even fundamentally sound companies can be left to face the fallout of factors beyond their control.

If you’re facing serious decisions about the future of your company then get in touch with us.

One of our expert team of advisors will arrange a free initial consultation with you to find out what obstacles you’re facing and to build out a roadmap to recovery.