Things to get worse for small UK airports due to loss of EU subsidies

THE UK will struggle to support small airports and their communities following Flybe’s collapse because it can’t rely on EU-backed public service obligations following Brexit.

The EU subsidies are used to bankroll what would otherwise be financially unviable services, with 21 public service obligation (PSO) routes currently in operation in the UK.

Flybe operated just one PSO route — from Newquay to London Heathrow — but had already said late last year ago that it would discontinue the service.

Flybe’s collapse on Wednesday night was billed as a disaster for regional air connectivity in the UK and puts enormous pressure on Boris Johnson’s Government to live up to its promise of keeping the regions glued together. The airline is part of Connect Airways, which also owns Aer Lingus Regional operator Stobart Air.

Connect Airways backers include Stobart, a unit of Virgin Atlantic and US-based hedge fund Cyrus Capital Partners. Last week Willie Walsh, chief executive of Aer Lingus owner IAG, insisted that Stobart Air would be insulated from a Flybe collapse.

While Flybe’s demise was anticipated within the aviation industry for some time, its death-knell will still come as a shock to many small, regional airports in the UK that relied on the carrier for connections to London, for instance.

It served small, or thin, routes where there wasn’t significant demand, with destinations including Jersey and Anglesea.

Belfast City Airport is among the small gateways that have been hit hard by Flybe’s failure.

The airline accounted for about 80% of scheduled services at the airport.

As of last September, there were 176 air routes across the EU that were subsidised by the trading bloc as PSOs. They include routes between Dublin and Donegal, and Dublin and Kerry.

In the UK, there were 22. They include routes between remote Scottish islands, as well as a service from Dundee to London Stansted. The contract for the PSO route between Newquay and London Heathrow was due to run until October 2022. In 2018, it was allotted a £0.6m subsidy, but the money was only payable “if a reasonable profit was not made”, according to the EU’s department of mobility and transport. The UK could decide to directly fund PSO air routes previously subsidised by the European Union. The total cost of the PSO subsidies in 2018 for the UK air routes was relatively small — just over £8.6m — and would hardly break the Treasury.

The International Air Transport Association has predicted that global airlines could lose as much as $113bn (£87.3bn) in passenger revenue this year as a result of the far-reaching fallout from the coronavirus.