On Tuesday, Aurigny announced it would fly both the Jersey and Southampton routes, both of which are operated by its local rival, from May.
The two airlines scrapped a code-share arrangement on the inter-island route in March 2016 with both saying they were making significant losses when competing on it.
‘It is difficult to understand the commercial rationale behind the decision of Aurigny’s management to re-enter these markets,’ said a Blue Islands spokesman. ‘Both markets have historically proven to be unable to support a significant oversupply of capacity and availability of fares in the market that fail to cover the costs of operation.
‘Having operated these routes for many years, Blue Islands is in the privileged position to understand these markets and the commercial challenges each faces. Capacity is certainly not a limiting factor in either market. Blue Islands currently operates up to 10 flights per day between Guernsey and Jersey, with 77,000 seats flying empty in 2018 – almost half of the capacity operated by Blue Islands. This is in addition to any surplus capacity offered on Flybe operated services. The introduction of two additional flights in each direction from Monday to Friday on a 48-seat aircraft represents some 50,000 additional seats to the existing surplus.’
On the Guernsey to Southampton service in 2018 roughly one third of Blue Islands’ capacity was empty, some 55,000 seats.
‘Blue Islands does not dispute that price elasticity of demand exists in these markets. As with most products and services reducing prices can increase volumes. The challenge is striking a balance that allows the service provider to, at the very least, cover their costs. With high operating costs on both routes and an inherently limited island market, reducing fares in order to stimulate additional sales incurs greater losses as both Blue Islands and Aurigny have previously stated. A return to the inter-island route that Aurigny has previously vacated because of the significant losses it made when operating the route is certainly a surprise.’
At the start of 2015 Aurigny’s Mark Darby said both airlines were losing a considerable amount of money providing the inter-island service – something the Blue Islands spokesman acknowledged was correct: ‘As reported in the Guernsey Press on 27 February 2019, the Guernsey to Jersey market has contracted by 27% over the last five years, making this commentary as valid now as it was then.’
Blue Islands believes the move is also at odds with the Aurigny Strategic Review Report published in May 2017 by Deputy Lyndon Trott, Stuart Falla MBE and Dr Andy Sloan which stated: ‘A number of stakeholders advocated that Aurigny should resume services to Jersey. The panel understands that if Aurigny as currently managed were to be asked to operate the Guernsey-Jersey route that the frequency of services and the price per seat would be roughly the same as is currently obtained from the present Blue Islands service provider. To replace one airline with another would achieve little for the travelling public.’
The Blue Islands spokesman said: ‘In our view the oversupply of capacity (and associated losses) will once again prove to be unsustainable most likely resulting in further tax payer subsidy of Aurigny. This will no doubt be considered as part of the recently announced review into the efficiency of Aurigny by the Scrutiny Management Committee and the States’ Trading Supervisory Board.’
Aurigny has said the new routes will help it with the target of breaking even.
It expects to recover some of the lost traffic on the route by flying at convenient times.
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