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Volume 802: debated on Thursday 5 March 2020


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?

Passengers, local economies, and of course 2,000 employees face a difficult time ahead. Can the Minister confirm what engagement the Government have had with Unite and BALPA today and give an undertaking that the Government will play a full role, alongside Unite and BALPA, to help Flybe workers find new jobs?

The talk of HS2, bus and cycle lanes in the Statement sounds woefully misplaced in this context. That will not help Cardiff and the south-west, and they certainly will not help Belfast. The words

“The Government are well prepared”

for the impact sound hollow today, as an airline folds due to a slight downturn in bookings. The impact on consumer confidence, on the likelihood of passengers and businesses continuing to book flights, and on their concerns about cancellations and loss of money must not be underestimated. Will the Government agree to engage with the relevant user and consumer groups, so they can also play their part in in rebuilding consumer trust and ensuring that passengers are treated fairly?

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.”

Exactly how will the Government offer help to this sector? There is a danger that the Government are offering more help that actually cannot be implemented in the end.

The importance of Flybe has been overwhelmingly in its routes to isolated parts of the UK. Some such routes in the UK have PSO status, but only one is a Flybe route: the Newquay to Gatwick route. France has 22 PSO routes, so, even if we are still working to EU rules on this, I ask the Government to reconsider the number of internal routes that are given PSO status, because that is what will provide long-term certainty and a long-term levelling up for parts of the country that are very isolated.

Coronavirus is undoubtedly a factor in tipping this company over the edge probably slightly earlier than would otherwise have happened, and there will be other cases.

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.

The noble Baroness, Lady Hayter, mentioned CAA resources; the CAA outlines the adequacy of its resources every year in its annual report. It is working within its current resource envelope in order to staff the failure of Flybe, and we are not aware that it has any concerns.

The Government are, of course, working very closely with all of the airports. A number of airports were heavily reliant on Flybe flights. We are working very closely; my colleague the Aviation Minister has already called the airlines and the airports this morning, and that engagement will continue. Later today, she will be calling key figures, either metro mayors or local authorities, where appropriate.

In terms of protections for employees, both of Flybe and of the different airports, the DWP does stand ready to offer support. It has been in touch with both BALPA and Unite already today and is working with them.

One of the points from the noble Baroness, Lady Hayter, made me feel that she is very much in favour of aviation. However, Labour wants to include a frequent flyer levy, which would have a significant damaging impact on aviation. Should Labour wish to retain its goal of net zero by 2030, I think it was the GMB that said that that would mean one flight every five years for people. So I am not entirely sure that Labour can be the great champion of aviation; should it ever come to power it would indeed decimate it.

The noble Baroness, Lady Randerson, mentioned PSOs. Those will be really important going forward and will be one of the key levers in the way we will be able to improve connectivity. We are looking at all options for expanding the scope of PSO policy. As we leave the European Union, the different rules we will be able to put in place will certainly be hugely beneficial to various places. On her specific question on transport from the Isle of Man to Liverpool, I will need to write forthwith.

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.

I hear completely what the noble Lord is saying. The route from Newquay to London is clearly incredibly important, which is why it has attracted a PSO, so we are looking at a replacement operator. We hope one will be able to step up. The local authority can select a new provider for seven months, then re-tender.

My Lords, having once worked as a pilot flying domestic services out of Southampton, among other places, I am pretty sensitive to what has happened. Can my noble friend say what public funds have so far been made available to Flybe? Will they be recovered?

My noble friend raises an interesting point, because there is a lot of misconception around what happened in January and what public funds were or were not made available. The conversation in January focused on a number of commitments from the Government, which included a review of air passenger duty, the review of regional services and a time-to-pay agreement, which any business can enter into with HMRC to get through a short-term cash-flow difficulty. Not a single penny of taxpayers’ money was given to Flybe. In return for looking at those things, the share- holders put in additional cash to get Flybe through its operational difficulties. It is those same shareholders who have now concluded that Flybe has no long-term future.

My Lords, if the normal public service obligation process is used, it will take a long time. Will the Minister consider a short-term use of a PSO to keep some of the critical routes open while negotiations to get long-term operators continue? We have a perfect storm whereby all airlines are suffering because of the virus and because this is a very difficult time of year for them. As has been pointed out, in Belfast between 80% and 90% of the flights are Flybe. There are some critical routes, and we have no alternatives. I appeal to the Minister to bring in a special type of PSO in the short term to keep some of these key routes going while negotiations continue, because many of them will profitable. Also, would she be prepared to meet with me and my colleagues as soon as possible to discuss this?

The noble Lord raises an interesting point about PSOs. The Government are looking at all options to restore as many routes as possible. We must also be mindful that wherever we restore routes, we must do so within the law as it stands regarding PSOs.

My Lords, is the Minister aware that 27% of flights from Cardiff Airport are operated by Flybe, and that 340,000 passengers a year use it to fly from Cardiff to European destinations? Will the Government arrange urgent discussions not only with other air operators and all train operators but with the devolved Governments to discuss the short-term crisis facing them and how to achieve a longer-term strategic settlement that addresses the economic implications for regional economies?

The noble Lord raises an interesting point. My colleague, the Aviation Minister, will be making calls this afternoon to the devolved Administrations and many other stakeholders to ensure that this is the start of a long-term discussion about the importance of air connectivity to the regions.

My Lords, as a regular user of Flybe services from Belfast over many years, I too am deeply saddened by and concerned about today’s announcement. The impact on Northern Ireland could be huge. I welcome the Minister’s reference to the commitment in the Conservative Northern Ireland manifesto to looking at devolving short-haul air passenger duty to the Northern Ireland Executive. In view of today’s sad announcement, and the fact that we now have an Executive up and running, will the Minister commit to taking this forward as a matter of urgency?

My Lords, how will Flybe’s collapse impact on Skybus and its flights across the Scilly Isles? Does this make it even more important that we push for the ferry that should be running between the island and the mainland?

I am not aware of any impact on Skybus, although I am not 100% sure about that. The Isles of Scilly are a very important destination for a number of Members of your Lordships’ House, and a ferry is certainly a very good way of getting there.

My Lords, following on from the point made about passenger duty, I am sure that the Minister appreciates that that is a devolved matter so far as Scotland is concerned. Will there be discussions with the Scottish Government on this matter? It is quite important that a solution be found which covers the whole of the United Kingdom.

The noble and learned Lord is quite right: the Scottish Government have taken a slightly different approach to passenger duty from the UK Government. Discussions with the devolved Administration will be under way this afternoon, and they will no doubt include the future of air passenger duty, but it is for Scotland to decide how they wish to charge it.

My Lords, the discussion to date has, necessarily, been a sticking-plaster type of discussion; and noble Lords have raised other airports and operators that may in future require such sticking-plaster announcements. Can the Minister confirm that some sensitivity analysis is under way to identify where problems could arise in future? Does she agree that, in the long run, the way to deal with such issues is to have a proper strategic transport plan across the country?

My Lords, the aviation industry is a highly competitive market, and obviously, private companies operate in it. None the less, the noble Lord makes an important point about the Government’s insight into the financial future and sustainability of airlines. I am sure that he will be pleased to hear that the CAA already undertakes that role. Where potential financial issues are on the horizon, the Government are made aware. Therefore, plans can be put in place.

My Lords, may I declare an interest, in that my wife and I are due to fly with Flybe to Bergerac for Easter? I am particularly concerned about that. I am grateful for the Minister’s helpful advice on seeking compensation but my question is about the Flybe shareholders. My understanding is that Virgin is a major shareholder and that the plan was for it to operate these services as Virgin Connect. Why has Virgin not been involved? Why is it not ready to take over the services? Our understanding is that Virgin is a major aviation company in the United Kingdom.

The noble Lord is right. Virgin is a minority shareholder in Flybe, with a 30% stake. My understanding is the same as his—that Flybe was due to be rebranded as Virgin Connect. I think that overnight, the shareholders reached an agreement that there was no long-term future for Flybe as it stood, so they decided to pull the plug and make it insolvent. From now on, therefore, the winding-up process will be in the hands of the insolvency practitioner, using the usual well-established processes of insolvency. On the other point, I am sorry to hear that the noble Lord’s tickets to Bergerac may not be valid, but I am sure that he will receive compensation somehow.

My Lords, I thank my noble friend for this timely Statement and for the detail and comfort that she can offer at this time. Can she underline some important information for passengers using Teesside International Airport, who may be concerned about this? The Tees Valley mayor, Ben Houchen, has done a tremendous job in getting that airport up and going. Flybe is a franchise partner of Eastern Airways, but Eastern Airways is independent. It operates its own aircraft and has its own crew, and it is completely unaffected by this announcement. Mayor Ben Houchen put out this statement today:

“Eastern is completely independent of Flybe and as a result passengers using Teesside Airport will not experience any disruption as a result of the anticipated devastating news for Flybe. I want to stress that flights will continue as normal and can continue to be booked through Eastern’s own booking system.”

Will my noble friend underline that important message?

My noble friend is absolutely right. We cannot be clear enough that this affects only Flybe, and that at many airports, Flybe makes up only a small number of the flights. At Teesside, I believe that Flybe passengers account for only 14% of passengers, so that airport remains very much open for business, and there are some excellent airlines operating out of it. Passengers should therefore continue to fly with confidence. For example, at Leeds Bradford, Flybe accounts for just 5% of passengers. Again, passengers should feel confident in booking with other airlines out of Leeds Bradford—and, indeed, many other regional airports.

My Lords, Flybe is not the first notable company to go bust in recent times—one thinks of Carillion—but does the Minister agree that the protection of workers in these circumstances is totally inadequate? Will the forthcoming Employment Bill be an opportunity to enhance and protect their rights in relation to prior consultation on circumstances that might lead to the collapse of a company; to place obligations on the company to provide more by way of retraining and assistance with finding alternative employments; and to enhance redundancy pay? One sympathises with the passengers in this case and the customers of other companies, but it is the workers who, I understand, heard of their loss of jobs—their loss of careers in some cases—on the radio, as we did, this morning.

On the issue of communications with employees, hearing it on the radio is less than ideal. I am sure it is not how any noble Lord would treat any of their employees. It is not acceptable and there are better ways of keeping employees up to date with what is going on. I cannot agree with the noble Lord that all is doom and gloom for employees and that everything must be improved. As I set out in the opening Statement, there are many routes that employees can now take. The Government stand ready to help, working alongside the unions, and the Insolvency Service is able to make payments.

To pursue the question put by the noble Lord, Lord Foulkes, on routes and the fact that Virgin is a major shareholder of Flybe, what will happen to Flybe’s profitable routes? Can my noble friend assure the House that there will be a proper procedure to make sure that they are sold to the highest bidder, so to speak? I raised the question of PSOs in the earlier Statement: will she make sure that this is dealt with as a matter of urgency?

Aviation services are part of the market economy and we would expect the profitable routes to be taken up by other airlines. As I have mentioned, we have had proactive input from a number of airlines looking to service those routes. I can say no more about PSOs. The Government are looking at both the profitable routes and those that may need support, and at all possible options to get them up and running.

My Lords, the issue of air passenger duty has been raised. I ask the Minister to consult with her Treasury colleagues about it because, in the event of it being devolved to, say, the Northern Ireland Assembly, the difference in revenue created by the reduction in air passenger duty would automatically come out of the Northern Ireland block grant. As the new Executive are at least £600 million short, that would be a huge challenge. Will she consult with her colleagues in the Treasury, pre-Budget, to make that point? It could be a way of opening things up but it would cost the Northern Ireland Executive an awful lot of money that they do not have at their disposal at the present time.

Will my noble friend acknowledge the fact that, often, the slots available to airlines are of more value than the trading conditions? Can she confirm that we will not see here a market for slots, from which a number of airlines will benefit without taking the social responsibilities that will be lost as a result of this failure?

My noble friend makes an important point about the tension between the slots, social responsibility and regional connectivity. The Government will be looking at that issue with keen interest as the Flybe assets go through the insolvency process. As my noble friend will know, slots are subject to an independent system of allocation managed by Airport Coordination Limited, which follows international rules. The Government are alive to what my noble friend is saying.

My Lords, in 1987, I was chairman of Dan-Air in identical circumstances. I had to put in a liquidator if we could not find an immediate solution. The night before, I had dinner with John Major and explained to him the dire effect that this would have on the whole of the Gatwick complex; it was likely to close Gatwick completely as we owed it so much money. He had breakfast the next day with Lord King, and by 4 pm Lord King had bought Dan-Air from me for £1. As a result, nearly all the collateral damage we are talking about here was avoided. The bits that were of great merit and worth keeping, British Airways duly kept and unified. The only logical solution here to avoid the calamity that will follow from the complete closure of Flybe is for it to be taken over immediately by one of our surviving airlines. If instead of paying me £1, somebody has to pay it a bit more to do it, it will be a far better job than putting in a liquidator.

I thank my noble friend for that little piece of history, but this Government’s view is that it is not our role to prop up a company that clearly has no viable long-term future. If it had a long-term future, another airline would have stepped up to purchase it.