£5m. to be set aside in case Aurigny exits from Alderney routes
A CONTINGENCY sum of £5m. will be set aside in next year’s Budget in case Aurigny stops operating either or both of the Alderney routes.
The 2020 Budget says that there would be one-off costs if the States-owned airline ceased operating on either the Alderney-Southampton route, or the lifeline Alderney-Guernsey route.
Aurigny is forecasting big losses next year, which have to be met by Bailiwick taxpayers.
Alderney’s Policy & Finance committee chairman James Dent said he was surprised to see that £5m. was being set aside as a precaution for the routes disappearing.
Mr Dent, along with business owners and residents of Alderney, are campaigning for a better quality service from Aurigny and a petition has collected hundreds of signatures.
Currently it is a three-aircraft model to run the Alderney links, but if that is to continue to be run by Aurigny, it will require the wing of one of the Dorniers to be replaced at a cost of £500,000.
If there is a switch to a two-aircraft model, Aurigny would suffer a potential £1m. loss on the disposal of the two old Dornier Classic aircraft.
The States bought the airline in 2003 to secure the air link between Guernsey and Gatwick, and the assumption was made that the finances would at least start to break even and eventually return to profit.
In 2018, the airline posted a loss of £3.6m., and £3m. of that deficit came from the Alderney routes.
Since then there has been a downward spiral. The losses for this year are forecast to exceed £7m. and next year they are anticipated to be £9.6m.
In a statement Aurigny laid much of the blame for the deficit on the decision to invest public money in Flybe’s new Heathrow route.
‘Even though the airline was close to break-even in the first three months of the year, the position changed dramatically following the opening of the new routes in response to open skies as well as the decision to heavily subsidise the new Flybe-operated Heathrow route.’
A breakdown of the anticipated £9.6m. deficit shows that £3.7m. is down to net effect of liberalisation of the air route licensing regime and subsidised competition.
Operating costs, particularly for Alderney, account for £3.6m. of the projected losses.
The remaining portion of the losses is due to increases in the costs of fuel, crew, ground handling, and the decline in sterling’s value against the dollar.
The new ATR 72-600 aircraft should be in operation next year, a £1.1m. benefit, and this younger and more reliable fleet should reduce delays, disruption and maintenance costs.
Policy & Resources wants to create an air link framework linking all relevant States committees. Aurigny has welcomed this development and said it looks forward to participating in the review and developing a sustainable air transport policy.
P&R wants the backing of the States to make available a temporary overdraft facility to Aurigny or guaranteeing external facilities of a maximum of £25.7m. in 2020.
It wants to make similar arrangements for £5m. in case Aurigny pulls out of either or both Alderney routes.