‘Cut airport fees if you want lower fares’
A FULL or partial waiver of airport fees ‘would result in a material change to the fares airlines could offer’, Blue Islands’ chief executive has said, as he proposed alternatives to an open skies policy that is ‘based only on hope’.
Economic Development’s air transport licensing policy letter will go to the States this month, with recommendations to move to an open-skies approach for all routes except London Gatwick and Alderney.
Blue Islands chairman Derek Coates has already written to the committee’s president, Deputy Charles Parkinson, with his fears that the move would have ‘devastating’ implications.
Now chief executive officer Rob Veron has written to all deputies calling for them to reject the change in approach.
‘[Economic Development vice-president] Deputy Andrea Dudley-Owen is quoted in the Guernsey Press as stating “it is hoped this approach will facilitate new route development”,’ he said.
‘Blue Islands is grateful for the opportunity to discuss our concerns with the committee, though this engagement has only confirmed that there has been no meaningful, quantifiable analysis of the proposed move and no scenario planning and hope appears to be the only basis.
‘The appearance of a predatory competitor on any given route may well lead to a short-term reduction in fares as airlines wrestle for market position.
‘I assure you, however, these fares would not be “consistent with viable operations’’.
‘You may well achieve a short-term booming in capacity and availability of fares offered at below cost, but this will not last and the service provision that emerges following the bust of one or other operator may very well be more expensive, lower frequency and of a reduced quality to that which existed before as the surviving operator seeks to recoup the losses incurred in establishing that position.’
Mr Veron said the States is an enviable position when it comes to influencing the island’s air links.
‘Guernsey currently has two indigenous operators with aircraft and crew based in Guernsey, an incredible position for an island of some 60,000,’ he said.
‘This allows for the greatest possible resilience in times of disruption, be it weather, technical or crew sickness among others. For these operators, Guernsey is a central home market.
‘Would other potential operators provide the same resilience, or would Guernsey be a small part of a wider network, dropped in favour of larger and more profitable opportunities elsewhere on the network? Is this a risk worth taking?’
Mr Veron said there were safer and more demonstrable ways to improve the island’s links.
‘A full or partial waiver of airport fees would clearly result in a cost to the tax payer as the reduction in Guernsey Airport revenue would lead to a higher subsidy requirement,’ he said.
‘However, this would result in a material change to the fares operators could offer. Furthermore, this change could be implemented in a matter of weeks and would serve as an excellent test case of the elasticity of demand, by route, in a real world setting.’
He said performance indicators, which are in place for London Gatwick could be extended to other routes which have a recent history of being unable to sustain meaningful competition, such as Southampton, Manchester and Jersey.
‘I fear that the committee, doubtless with good intentions, has identified a cost neutral, in terms of immediate government outlay, change that has not been appropriately assessed in the hopes that this will somehow fix the fundamental issue which is the sub-scale nature of the Guernsey market.’