Is APD Exempt a Relief for Flybe?
By: Nc Airways
Tags: Aviation, News, Airlines

Relief for Flybe

As reported earlier the troubled European regional airline, the Exeter-based company Flybe was on the verge of collapse. Flybe is one of the main airlines that fly domestic routes in the UK — 38% of them. It has been struggling for survival for several years.

Also Read: Flybe Insists Normalcy while Troubles Mount

January 14, 2020. A relief for Flybe. It got a virtual lifeline — not through its own resources, but through an obligation from the government. On this day, business minister Andrea Leadsom declared that the Flybe shareholders have struck a deal with the British government to keep Flybe operating. With this announcement over 2400 Flybe employees, customers and creditors feel relieved, at least, temporarily.

The deal between the Government and Flybe centred around Air passenger duty (APD). It is charged on all passenger flights from UK airports, except the Scottish Highlands and Islands region. The amount depends on the destination and class of travel. At present, air passengers pay £26 APD on a return domestic flight (and £13 on a return flight to a European airport).

Airlines claim APD restricts connectivity. Flybe has been a long-time critic of APD, which it says disproportionately burdens its domestic customers. It put up its case before the government as:

We understand, with building awareness of the higher CO2 emissions from a flight that utilising the train or coach, (and “flight shame”) that some of the domestic routes should be discarded, Many of our routes have become not profitable, We cannot pay our APD bill to you — about £100 million over three years.

So the government, considering Flybe’s case with a sense of apparent compassion, decided to remove APD from all domestic flights.

The government earlier used to talk about the importance of regional connectivity before the elections. The government recently has stated that it was “not for government” to step in and save companies that run into trouble.

But, at the same time, developing connectivity outside of London was a key promise in the Conservative manifesto and at least one of Flybe’s routes, between Newquay and London, is subsidised by the government.

The possible deal over APD could see Flybe defer payment of more than £100m for three years. By applying the move to the whole industry, the government would avoid breaching EU state aid rules. The change would also allow Flybe to design a rescue plan for itself and secure more than 2,400 jobs.

Leadsom tweeted: “Delighted that we have reached an agreement with Flybe’s shareholders to keep the company operating, ensuring that U.K. regions remain connected. This will be welcome news for Flybe’s staff, and we will continue the hard work to ensure a sustainable future.”

On one hand, the deal delighted Flybe and its well-wishers, while on the other hand other groups were left in a state of shock.

The environmental groups said such a move would be “reckless” given the need to prevent climate change. Any move by the UK government to withdraw APD on domestic flights would be unhelpful on CO2 emissions. Campaigners who have been relentlessly working for the need for cuts in carbon emissions naturally reacted with fear over this ruling.

Doug Parr, the chief scientist at Greenpeace, summed up:

“This is a poorly thought out policy that should be immediately grounded. The Government cannot claim to be a global leader on tackling the climate emergency one day, then making the most carbon-intensive kind of travel — flying — cheaper the next. ”

The business minister did not comment on duty towards the protection of the environment. What the government did would amount to be entirely the opposite of what is actually needed, to tackle UK carbon emissions and those from UK aviation in particular.

Aviation is now supported by not paying VAT. The loss to the Treasury from leaving domestic APD would have to be covered up by taxation from somewhere else. It is not prudent to consider that all domestic flights are vital to the economy. Most are leisure passengers, making trips to visit places or people, friends or family. That’s why people have started embracing ‘fly-shame’.

The story of Flybe so far once again highlighted that a company like Flybe could not generate its own resources that could keep it afloat. It finally has to get an obligation from the government after numerous pleadings. In other words, it continues to be a liability to the Nation.

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