British Airways have the PSO contract (since Flybe’s demise) for taxpayer subsidised flights between Heathrow and Newquay
The government agreed in 2018 to subsidise flights from Newquay to Heathrow. These were initially to be by Flybe. Flybe then collapsed in March 2020. The subsidy is through a Public Service Obligation (PSO) intended to give financial assistance to unprofitable routes, which are deemed “vital” for an area. The cost to the taxpayer was expected to be £3,4 million, over the 4 years of the PSO, till 2022. That would be £1.7 million from the DfT and £1.7 million from Cornwall Council. It appears that since Flybe collapsed, the PSO was put out to tender again. British Airways is now being paid £125,000 per month to operate these flights. The website Simple Flying says “under the emergency order, the [Cornwall] council will be paying British Airways £877,596 excluding VAT, to operate services to Newquay for 7 months …. According to details on the European Union’s Tenders Electronic Daily, the 7-month contract was issued as a result of the collapse of Flybe. Only one compliant bid, that of British Airways, was received in the 48 hours that the proposal was open.” No passengers used Newquay airport in May 2020. The first flight date shown is 3rd September 2020.
British Airways Is Being Paid £125k Per Month To Fly To Newquay
by Tom Boon (Simple Flying)
July 28, 2020
British Airways is being paid £125,000 ($162,000) per month to operate domestic flights between London and Newquay. Cornwall Council is funding the amount to ensure services between the two airports under a public service obligation. At just 210 miles as the crow flies, the route is one of the British flag carrier’s shorter offerings.
A large hole was left in the United Kingdom’s regional connectivity following the collapse of local carrier Flybe. The airline had been connecting small regional airports up and down the United Kingdom, and even abroad. Now, British Airways has stepped in to fill the gap of London to Newquay services.
£4,000 per flight
British Airways is receiving a hefty level of funding to operate flights to and from Newquay from Cornwall Council.
Simple Flying initially revealed that British Airways would be launching flights to Newquay back in February. This was before the collapse of Flybe. However, since then, the airline has signed a public service obligation with the local council.
The order was first spotted by Head For Points‘ Rob Burgess, who shared it on LinkedIn. Essentially, under the emergency order, the council will be paying British Airways £877,596 ($1,135,319), excluding VAT, to operate services to Newquay for seven months.
The PSO was issued in response to the collapse of Flybe.
According to details on the European Union’s Tenders Electronic Daily, the seven-month contract was issued as a result of the collapse of Flybe. Only one compliant bid, that of British Airways, was received in the 48 hours that the proposal was open.
Rob from Head For Points calculated that the deal is worth around £4,000 ($5,175) per flight to British Airways, on top of the revenue the airline receives from ticket sales.
What is a public service order?
According to the European Union, “In order to maintain appropriate scheduled air services on routes which are vital for the economic development of the region they serve, Member States may impose public service obligations on these routes… In case no air carrier is interested in operating the route on which the obligations have been imposed, the Member State concerned may restrict the access to the route to a single air carrier and compensate its operational losses resulting from the PSO.”
British Airways, Newquay, Public Service Order
The route to Newquay is one of British Airways’ shortest routes. According to a list of PSOs as of September 18th, 2019, Flybe held the PSO for the Heathrow to Newquay route from October 26th, 2018. It was due to hold on to it until October 25th, 2022, however, declared bankruptcy earlier this year. Four bids were received in the initial tender process.
Flybe’s PSO required it to offer 231,516 seats per year across 19 weekly return frequencies. The airline provided 258,420 seats in 2018. However, it only carried 173,446 passengers. This gave it a load factor of 74.92%. The agreed amount of €708,652.28 ($830,866) was only to be paid out if Flybe didn’t make a reasonable profit on the route. As such, the airline received just €4.09 ($4.80) per passenger in 2018.
Flybe collapses, despite huge investment by its owners – it is not getting more UK government cash
UK airline Flybe has collapsed into bankruptcy after months of talks with the government failed to secure a £100m loan. All flights have been cancelled. It was financially very weak, and the outbreak of Coronavirus hit its demand hard, speeding its demise. About 2,000 staff jobs are at risk. The government had rejected the idea of a state loan to the airline. Flybe had been told there might be a cut in Air Passenger Duty on domestic flights, but that would not happen fast enough to save the failing airline. Flybe was taken over in 2019 by “Connect Airways”— a consortium of Virgin Atlantic, Stobart Air and hedge fund Cyrus Capital – to prevent it falling into administration. Connect agreed in January to invest £30m into Flybe to continue operations, as part of a government rescue package that included APD cuts. Virgin Atlantic had invested over £135 million in Flybe to try to keep it going; that includes about £25m of the £30m committed in January 2020, alongside a “time to pay” arrangement with the Treasury on air passenger duty of £3.8m. Flybe’s administration follows last year’s failure of Thomas Cook, which also went bankrupt. Unless other airlines take up the Flybe routes, demand at many UK regional airports (eg. Southampton, Exeter, Newquay) will be hugely reduced.
Cornwall Airport Newquay makes key Heathrow flights announcement
By Mike Smallcombe (Cornwall Live)
7 JAN 2020
Tickets for Cornwall’s subsided daily service to Heathrow will be available to book beyond March this week after a period of uncertainty over its future, Cornwall Airport Newquay said. Passengers have been angered for several weeks by the fact they have been unable to book Flybe’s daily flights between Heathrow and Newquay later than March 28.
Flybe and the Newquay airport have been tight-lipped about the future of the service, which was launched last spring. saying only that the summer schedule has yet to be finalised. The route, run by Europe’s largest regional airline, Flybe, is run under a public service obligation (PSO), jointly funded by a government and Cornwall Council initiative. It will be subsidised until at least October 2022.
A spokesperson for Cornwall Airport Newquay has now confirmed that tickets “are expected” to be on sale this week. “Tickets on the London PSO service beyond March 28, 2020 are expected to be on sale from the week commencing January 6, 2020.
“Although you can currently only book travel on the service between Newquay and Heathrow until the end of March, the PSO service to London is contracted to operate four daily flights, seven days per week until October 2022 and that commitment remains unchanged.
Flight link between Newquay and Heathrow in doubt, after just one year
A flight link between Heathrow and Newquay, Cornwall, started at the end of March 2019, with 4 round trips per day using Q400 propeller turboprops, is said to have done well, in terms of the number of passengers. But now Flybe is not selling tickets for flights on the route beyond 28 March 2020. The “booking horizon” for scheduled flights is commonly 11 months. The only route from Cornwall to London now on sale after March 2020 is a 4-times weekly link with Southend airport. Earlier this year, a consortium comprising Virgin Atlantic, Stobart Group and a US hedge fund, Cyrus Capital, bought Flybe for £2.8m. They have pumped in tens of millions of pounds to keep Flybe, which is heavily loss-making, afloat. It is to be rebranded as Virgin Connect in 2020. Before the Heathrow route opened, there were 3 daily flights between Newquay and Gatwick. Flybe’s slots at Heathrow are valuable, if they want to sell them to sort out debts, as slots can change hands for over £50m a pair. From March 2018, the agreement was that for 4 years, the DfT and Cornwall Council would each pay up to £1.7m, per year, representing a subsidy of £5 per passenger – or £10 for a round-trip (with 170,000 passengers per year).
Flybe’s Newquay link with Heathrow takes off courtesy of taxpayer PSO subsidy (£6.2m over 8 years)
From next weekend people flying between Newquay and Heathrow will get a £5 subsidy each, from UK taxpayers. There will be 4 flights per day both ways. Newquay airport is not particularly near anywhere – other than surfing beaches. The service will be Heathrow’s only subsidised service, run under a public service obligation (PSO). PSOs are defined under European aviation regulations as “scheduled air services on routes which are vital for the economic development of the region they serve”. That means for routes where there is not enough demand to even half fill a small regional aircraft and that to attract a commercial operator to fly the route, the government has to provide a financial incentive. The cost to the taxpayer over 4 years for this will be £3.4 million. (For 180,000 pax per year that works out at £5 each. But there were only <93,000 pax in 2013). The pendulum is swinging back to Heathrow, however.Heathrow has set aside a £10 million fund to incentivise domestic airline route development – needed to persuade regional MPs to back the runway.