Flybe offer was better

In particular you assume that subsidies paid to Aurigny somehow flow round in a circle back to the taxpayer (‘The States could have kept the money for each Heathrow passenger flowing in a virtuous circle, instead it chose to hand it to a third party’).

Hardly any regional airlines make a profit. The income they receive, in fares and subsidies, is almost all dispensed in the cost of operating their services – to third parties. That is just as true for Aurigny as it is for any other airline. And much of the very high cost of operating at Heathrow is paid to the airport.

In choosing to support any route to Guernsey, the Committee for Economic Development has to make a rational analysis of the options. This analysis starts from our strategic investment objectives, which were set out in our Policy Letter of last December ‘States of Guernsey Air and Sea Route Policy Development and Investment Objectives’, which was decisively approved by the States. One of the objectives set out in that Policy Letter was to establish a connection to an international hub, ideally Heathrow.

We said ‘The objective here is that as many people as possible around the world should be able to get to Guernsey on direct flights or with one stop.’ We went on to say ‘To best meet these objectives it is believed that a carrier wishing to operate this route should either be an international airline, or one with a code share arrangement with one or more international airlines, and therefore will have international marketing reach and will make Guernsey more visible as a destination to existing and potentially new markets. It goes without saying that the carrier also needs to operate aircraft that are permitted to land at Heathrow.’

In this case, we chose to support an offer from Flybe, rather than Aurigny, for the following reasons:

1. Aurigny’s initial assessment of the support necessary to cover the net cost of operating a 12-month service to Heathrow was around £2m. – which is about £167,000 per month. For comparison, the support we have agreed to give Flybe is £825,000 for seven months, which is about £118,000 per month. This means that we are able to test the Heathrow market at considerably less expense with the Flybe offer.

2. Aurigny does not have any code share agreements with any other airline, whereas Flybe has a variety of code share agreements. Flybe is joining the Amadeus Central Reservation System, which will further enhance the visibility of its flights.

3. Flybe may soon be rebranded Virgin, a global brand, which would further enhance the visibility of the London Heathrow to Guernsey route.

4. Aurigny has no ground handling operations at Heathrow, whereas Flybe has an existing base at Heathrow Terminal 3. Inevitably, the start-up costs for a new route (which may be temporary) for Aurigny would be much higher than for Flybe.

5. Aurigny has only one aircraft which would be permitted to operate into Heathrow and that is currently fully committed to the Gatwick route. While Aurigny could redeploy its assets to free up its Embraer 195 jet for a Heathrow rotation, the airline would have no back-up planes if the Embraer 195 was unexpectedly out of service. All planes in Flybe’s fleet can operate into Heathrow.

6. Although the Embraer 195 offers more seats than the Dash 8 Q400 Flybe proposes to use, we do not know what the demand will be. If it is higher than expected, Flybe has Embraer jets in its fleet (both 195s and 175s) with which to expand capacity. In the meantime, the much cheaper Dash 8 Q400 is a lower-risk option.

7. In terms of indirect economic benefits, obviously any spend by any airline at Heathrow will benefit the UK economy. As it happens, Aurigny is Flybe’s handling agent in Guernsey, so whichever of these two airlines was selected, the same staff would be employed on the ground in Guernsey. It is impossible to know where the pilots might be resident, or where fuel might be uploaded, so the main point of difference between the airlines would be their administration. Here, it is clear that an investment in Aurigny would provide a greater benefit to Guernsey than an investment in Flybe. But the percentage of the total funding which would be applied to administration would be quite small.

In short, the Flybe offer was significantly cheaper, more resilient and more likely to help us achieve our investment objectives. We would damage our economic prospects only if we gave preference to Aurigny in all cases regardless of the merits of any competing bids.

We rarely give route development support on any route, beyond the standard discounts against landing fees offered by Guernsey airport. In fact, of the seven new routes opened up since the adoption of our ‘Quasi Open Skies’ policy last September (Edinburgh, Bournemouth, Liverpool, Southend, Newquay, Groningen and Heathrow) Heathrow is the only one that we have supported in this way. We are custodians of taxpayers’ money, and it is our duty to use it wisely.

CHARLES PARKINSON

Economic Development president