Flybmi

– in the House of Commons at 4:32 pm on 18th February 2019.

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Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport 4:32 pm, 18th February 2019

(Urgent Question) To ask the Secretary of State for Transport to make a statement on airline Flybmi going into administration.

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

On 16 February British Midland Regional Limited, the east midlands-based airline which operates as Flybmi, announced that it had ceased operations from that date and filed for administration. The group has surrendered its licence to operate in the United Kingdom, which means that it is no longer able to operate flights.

There has already been significant speculation about the reasons behind Flybmi’s failure. Ultimately, this was a commercial matter for the airline. Flybmi operated in a very competitive industry and was exposed to wider pressures faced by the global aviation industry, such as increasing fuel prices. It is very disappointing that it has gone into administration, and we know that this will be a very difficult time for those who have lost their jobs as a result. Many of those affected are highly skilled. We are confident that they will find suitable employment opportunities, and we welcome the moves by the sector to offer such opportunities.

The Insolvency Service’s redundancy payments service is working with the administrators of Flybmi to ensure that former employees’ claims from the national insurance fund, which may include redundancy pay, holiday pay, arrears of pay and compensatory notice pay, are assessed as quickly as possible. However, given that the sector is ready to recruit, I hope that new jobs will be found soon.

I also recognise that this is a disruptive and distressing time for passengers, and the Government’s immediate priority is fully focused on supporting those affected. We are in active contact with airports, airlines and other transport providers to ensure that everything possible is being done to help them. We and the Civil Aviation Authority are working closely with the travel industry to ensure that the situation is managed with minimal impact to passengers.

There are enough spaces on other flights for passengers to return home on other airlines, and we welcome the sector’s move to offer rescue fares for affected passengers. For example, Flybmi has codeshares across the Lufthansa group and passengers on these flights will be subject to the EU passenger protection rules. They will be provided with assistance and rerouted to their final destination. Travel insurance and credit card bookings are worth noting here, and most passengers were business travellers so will be covered through their work. In addition, the Civil Aviation Authority is providing detailed information for affected passengers on its website, including how people can claim back money they have spent on tickets.

The Government recognise the importance of maintaining regional connectivity, which is why we fund a public service obligation route from Derry/Londonderry to London, which was recently extended from 1 April 2019 for a further two years, the norm for PSOs. The chief executive of Derry council has the power to transfer the PSO contract to another airline for up to seven months to allow for a new procurement process to be conducted. Subject to due diligence we expect the council to sign contracts and appoint an airline later this week, and we expect services to resume swiftly. Derry City and Strabane Council takes forward that part; it is its responsibility.

All affected regional airports have been contacted, and while they are disappointed, we are confident that this will not cause them significant issues. A number of airlines have already indicated that they will step in to replace routes previously served by Flybmi. For example, Loganair has publicly announced that it will cover routes from Aberdeen, Bristol and Newcastle. Our priority is to protect employees, passengers and local economies. We are fully focused on supporting those affected and remain in close contact with the industry and the CAA to ensure that everything possible is done to assist.

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

It will not have escaped anybody’s attention that the Transport Secretary is sitting on the Treasury Bench yet has not come to this House to make a statement. He seeks to hide behind his Minister; she has been dropped in it. Perhaps he has been dealing with the bombshell dropped by Honda this morning.

Eighteen months ago Monarch Airlines left taxpayers with a bill for more than £60 million. Clearly the Government have failed to learn the lessons from that disaster. In fact, the Transport Secretary has dithered and delayed for nearly a year, allowing Loganair to cherry-pick the profitable parts of Flybmi before putting it into administration. The Government have clearly done nothing to stop a repeat of Greybull’s asset-stripping of Monarch.

Flybmi has been in difficulty for some time, so what plans did the Department for Transport have for an airline’s collapse? Have not the Government left both Flybmi’s passengers and staff high and dry? Why was the airline allowed to sell tickets only hours before administration? Why are the Government not helping people get home this time?

On Thursday last week, the Government agreed to extend the subsidy for Flybmi’s London to Derry route. Was the DfT aware that the airline was about to collapse when it agreed this commitment of public money? What checks did Ministers do on the airline prior to agreeing this? The Government’s aviation Green Paper boasts of growth and connectivity; in reality, Flybmi is the second UK airline to fail within months, while the UK’s direct connectivity has declined.

The Government’s complacency is staggering. Flybmi has said that

“the challenges, particularly those created by Brexit, have proven to be insurmountable”,

and:

“Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe and lack of confidence around Flybmi’s ability to continue flying between destinations in Europe.”

So when will this Government wake up to the undeniable truth that their shambolic handling of Brexit is leading our country into an economic disaster?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

I have never been a woman who has been “dropped in it”; it is my job and I am disappointed that the shadow Transport Secretary wanted to see a he and not a she at the Dispatch Box, but hopefully I can respond to his questions in the best way I can. I am also a little disappointed that the shadow Front-Bench team are all in their seats today considering the bold decisions their colleagues have taken to leave the Labour party because of a number of issues, including leadership and institutionalised antisemitism. We are talking about disappointment, but we should focus on the passengers.

We were made aware of Flybmi going into administration at the weekend. A number of conversations have been taking place. The aviation Minister has spoken to the Cabinet Secretary responsible for transport in Scotland.

The Secretary of State has spoken to the Northern Ireland Secretary and to the local MP, Mr Campbell. Information is being made available on the Civil Aviation Authority website to alert passengers about how they can get home. We must focus on the passengers who may be struggling to get home, but there are lots of alternative flights and that information is being made available. More than 300 staff have been impacted, but it is interesting to note that Loganair and Ryanair are making jobs available and recruiting heavily. The British Airline Pilots Association is also exploring options for pilots with partner airlines.

The hon. Gentleman noted the business case for Flybmi. It was possible to recognise, looking at its accounts, that it had been struggling for a while, including before Brexit and before the referendum. It is not an easy market for airlines to be in, especially regional and local airlines. He mentioned Brexit as a reason for Flybmi going into administration, but it is important to note that several other smaller airlines in Europe have also gone into administration, including Germania, VLM, Cobalt and Primera, and there are lots of different reasons why this takes place. We cannot always blame Brexit when we do not understand the business case.

The hon. Gentleman mentioned the public service obligation and wanted to put the blame at the door of the Department for Transport. In case I did not make myself clear in my opening statement, Derry and Strabane Council is responsible for maintaining and managing the contract. We of course support the route via the public service obligation because it is a lifeline route. I know that that reply must come as a disappointment to him, but that is where the responsibility lies. Derry and Strabane Council has made it clear to the press and to us that it is very positive that an alternative airline will be in place soon enough. It is important to note that the aviation sector in the UK is thriving and that passenger numbers have gone up by almost 60% compared with the numbers in 2000, but it is a very tricky sector to be in, especially for the small regional players in this very large market. I hope that those responses will not be too disappointing for the hon. Gentleman.

Photo of John Redwood John Redwood Conservative, Wokingham

Is there any known interest from other aviation companies or entrepreneurs in buying assets and taking over the staff in greater numbers, rather than in just cherry-picking the routes?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My right hon. Friend makes an important point. The staff are all highly skilled and very professional, and it is important to note that Loganair has already made it clear that it is keen to recruit. I also believe that Ryanair has set up a stall in some of the regional airports to try to bring some of those professional staff on board. We are very positive that they will be able to secure jobs, although this must be a very distressing time for them, as it must be for the passengers. A number of airlines are showing interest in the routes, and Derry Council has made it clear to us that it has some interested parties lined up to take on the route from Derry airport. It will make that information public as soon as it can.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Our thoughts at this time are with the staff, whose future is uncertain, and with those who have had their travel plans thrown into disarray, who are out of pocket or who are stranded as a result of the collapse of Flybmi. I am pleased that Loganair has announced that it is stepping in to cover the routes from Aberdeen to Bristol, Oslo and Esbjerg from 4 March. At a time when Aberdeen is feeling the impact of the loss of easyJet flights, the news of Flybmi going into administration is deeply worrying, particularly because it explicitly mentioned Brexit uncertainty as one of the reasons for this happening. Recent studies have shown that Aberdeen is set to be the UK city that will be the hardest hit by Brexit. It would be helpful if the Minister told us what the Government are doing to protect slots at Aberdeen and other regional airports after Brexit and what they are doing to ensure that airlines are encouraged to use those slots and that our regional airports have access not only to hub airports but to destinations.

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

The hon. Lady makes some important points, focusing on passengers and ensuring that they can continue their journeys and on the staff involved. One of Flybmi’s issues was that its flights were not always full, but the number of people who could have been impacted has been reduced as result. However, everyone whose journey home or to work has become difficult must be taken care of, and I ask them to pay attention to the CAA website for further information. Flybmi’s business model was just no longer working in a competitive market. Its public accounts show that it was in trouble before the referendum, so putting the blame on Brexit really does not wash. The hon. Lady makes a powerful point about Aberdeen, and we will do what we can to ensure that we support all our regional airports.

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

While the failure of Flybmi’s business model and the loss of 100 jobs in my constituency is a setback causing obvious distress for employees and disruption for passengers, it comes at a time of considerable growth and development in and around East Midlands airport, with over 7,000 new jobs being created over the next two years. Will the Government do all they can to ensure that Flybmi’s highly skilled employees are returned to employment as soon as possible, just as they did in 2012 when Flybmi’s parent company, British Midland, ceased trading with the loss of 1,100 jobs in my constituency?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My hon. Friend is a powerful advocate for his constituency and makes some valid points, particularly about the loss of skilled jobs. We were only made aware that Flybmi was going into administration over the weekend, and it is interesting to note the number of other airlines who have nipped in to see who they can recruit. I am confident that jobs will be found. My hon. Friend refers to passengers. The UK has a healthy aviation sector, and we must not dwell on undermining it. We had 284 million terminal passengers in 2017—an increase of 6% on 2016—so the market is healthy.

Photo of Paula Sherriff Paula Sherriff Shadow Minister (Mental Health and Social Care), Shadow Minister (Mental Health)

The Government have been consulting on arrangements for airline insolvencies for almost a year, so will the Minister explain how yet another UK airline can fail without the Government taking any action? Can I press the Minister to explain why the airline continued to sell tickets just hours before going into administration?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

An independent review of airline insolvency by Peter Bucks is due to report, and it will make clear what happens to airlines when difficult decisions are made. There is an interesting point to note about how airlines can continue to sell tickets when they are struggling, which is one of the peculiar things that happens in the sector. If an airline were to stop selling tickets, that would make it clear that it was about to go into administration, so airlines do keep selling tickets quite close to the point at which they are about to go into administration. The Peter Bucks review will no doubt examine that point.

Photo of Andrew Murrison Andrew Murrison Chair, Northern Ireland Affairs Committee

I welcome the Minister’s restated commitment to the PSO in relation to Derry and Stansted. Given this latest news, what further assessment is necessary of the long-term viability of Derry airport and of the welcome improvements to the A6 between Londonderry and Dungiven, which will increase connectivity to Belfast International airport? What further support does the Minister anticipate in the light of the Derry City and Strabane regional city deal?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

It is good that my hon. Friend notes the importance of Derry City and Strabane District Council’s role in procuring and maintaining the contract, and it is interesting to note the council’s positivity about other airlines taking on the route. I noted over the weekend that Ryanair was offering flights for less than £10 for those who wished to travel from Belfast, although that means making another journey. We are obviously committed to supporting our regional airports, to holding the CAA to account so that it monitors what airlines are doing when they are struggling and to examining what we can do to help passengers to continue their journeys across the UK.

Photo of Clive Betts Clive Betts Chair, Housing, Communities and Local Government Committee

It is quite frankly astonishing that the Minister did not mention Brexit in her initial comments, because the company certainly did. Flybmi said that uncertainty around Brexit and the possible costs of needing both UK and EU licences in the event of a no-deal Brexit were factors in its decision to go out of business. Will the Minister now make it clear whether all airlines should be planning for a no-deal scenario and looking at how to get dual licences?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

The EU has been very clear that the UK aviation industry can continue as it is. We have been having good conversations with the EU on this, and we have tabled a number of statutory instruments and regulations to make sure we can continue flying. I just do not buy the argument that planes will not fly.

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

No, but Flybmi’s accounts show that, as far back as 2014, it was not as healthy as it could have been. If a company undertakes flights that are barely at 50% capacity, it is making a loss. To make an assumption that it is all down to Brexit just does not wash.

Photo of Colin Clark Colin Clark Conservative, Gordon

As the Minister mentioned, Loganair has picked up many of the routes from Aberdeen International and is owned by the same holding company as Flybmi, Airline Investments. Will she join me in encouraging Airline Investments to give regional flights priority at this time? Will she reaffirm her commitment to regional airports? And will she make sure the slots are not reassigned to other routes, so keeping these vital regional routes open?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My hon. Friend makes three powerful arguments, and I agree with him. The Department, under my noble Friend the Aviation Minister, is undertaking the “Aviation 2050” consultation, which will no doubt reconfirm our commitment to regional airports.

Photo of Tom Brake Tom Brake Liberal Democrat Spokesperson (International Trade), Liberal Democrat Spokesperson (Exiting the European Union)

This is clearly very bad news for staff and passengers. I know the Minister does not like mentioning the B-word—Brexit—but the fact is that Flybmi has said that Brexit uncertainty was a factor. Not the total reason but a factor, as it was for Jaguar Land Rover, Ford and, as we will no doubt find out shortly, Honda. Is it not time for the Prime Minister to do two things: one, rule out no deal; and, two, establish a Brexit redundancy fund to support businesses that have been put out of business as a result of Brexit?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

If the right hon. Gentleman wants to rule out no deal, he should vote for the Prime Minister’s deal.

Photo of Kirstene Hair Kirstene Hair Conservative, Angus

It is welcome news that Loganair is taking on some of Flybmi’s routes, but my constituents want assurances on their new nearest airport in Dundee. We do not want to see the airport taking on other routes and losing the vital routes from Dundee down to London.

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

It is a very competitive market, and no doubt my hon. Friend’s constituents will be well represented here today. If she would like to meet the Aviation Minister, I will ensure that a meeting takes place. We are committed to all our regional airports.

Photo of Ian Lucas Ian Lucas Labour, Wrexham

Aerospace is one of the most important and successful of our sectors. Although the Minister may be having lots of good conversations with our friends in the European Union, there is no regulatory certainty. Does she think that is a good thing or a bad thing for our aerospace industry?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

If the hon. Gentleman wishes to have 100% certainty, he needs to vote for the Prime Minister’s deal. [Interruption.] We have had assurances from the EU that the airline sector can continue to operate in the way it is currently operating. [Interruption.]

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Order. The Minister is answering the question and there is quite a lot of sedentary chuntering on both sides, and no shortage of gesticulation, either. I am sure that Mr Knight will now behave with his usual statesmanlike reserve.

Photo of Julian Knight Julian Knight Conservative, Solihull

Thank you, Mr Speaker. The Minister is clearly deeply concerned about this collapse and the wider issues affecting aviation across Europe. Will she assure the House that she will do everything she can to support our regional airports— Birmingham airport, despite its successes, is running at 35% capacity—because they are so important to our country and our regional economic diversity?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My hon. Friend has my assurance, and I would be at fault if I did not mention Birmingham airport, which I grew up very close to and to which we are obviously committed, as he can no doubt tell by our commitment to High Speed 2 stopping at the airport. We are committed to all our regional airports, which is why we have the “Aviation 2050” consultation under way to make sure we do all we can to ensure the sector continues to remain healthy.

Photo of Mike Kane Mike Kane Shadow Minister (Education) (Schools)

In the event of a no-deal Brexit, there could be no expansion of airline routes from the UK to the EU. That is what is causing the huge uncertainty for operators in the UK. After two and a half years of negotiation, can the Minister not see the damage being done to the sector?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

I believe the hon. Gentleman is mistaken, as we are working with the EU to deal with deal and no-deal scenarios: we have published no-deal technical notices; we have tabled a number of statutory instruments, which are progressing well; and the EU has confirmed that it will maintain the connection between the EU and the UK to allow flying to continue. But if he is concerned about a no-deal scenario, he should vote for the Prime Minister’s deal.

Photo of John Howell John Howell Conservative, Henley

The collapse of Flybmi is to be very much regretted, but does the Minister accept that connectivity is about more than one airline and that she should continue to establish growth in airlines across the country?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

Absolutely. Even though the airline sector is a tricky market to be in and it obviously favours larger airlines—for example, it is a little easier for them to buy fuel than it is for smaller airlines—my hon. Friend is right to say that competition is good and we should do what we can to support not only our airports, but our regional airlines.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

My hon. Friend Mr Campbell was in touch with the Minister to seek reassurances about this. Flybmi has said that its decision is predominantly an economic one; it was averaging only 19 people per flight, which is not sustainable for any company or business. The public service obligation air route, the first of its kind in Northern Ireland, has been in place since 2017, and the Minister has referred to it. I am thankful for the assurance that the Government will continue to subsidise the route until 2021. Will she please outline whether provision will be made to expand that commitment for a further two years beyond that to encourage other airlines to take on the contract and the route?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

The hon. Gentleman makes an important point about the PSO, but it does run for this specific period, up to 2021. He noted that the Secretary of State has spoken to the local MP, the hon. Member for East Londonderry, and made a valuable point about the number of passengers per flight, which would have had an impact on the airline’s business model.

Photo of Henry Smith Henry Smith Conservative, Crawley

Of course Brexit has been blamed for other ills. Will my hon. Friend confirm that in the three years leading up to the Brexit referendum in 2016, Flybmi was losing more than £25 million and that its failure has more to do with fuel costs, European regulation and market forces?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My hon. Friend makes a valuable point. If we look at Flybmi’s accounts, we see that they were not healthy for many years, even before the referendum. Smaller airlines across Europe are also struggling, and I mentioned some earlier: VLM in Belgium, Germania, Cobalt and Primera. So this is not a UK thing; it is tricky for small airlines to operate, especially if they are regional, in a global sector.

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

If I was the chief executive of a recently failed business, I would probably blame Brexit, too, but the reality is that Ryanair warned only last month of significant overcapacity in the budget airlines sector. Does my hon. Friend agree that this is far more about competitive markets than it is about Brexit?

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

Absolutely. The reason for Flybmi going into administration is that the business has just reached the end of its road. We have an overcapacity here and the power is with the passengers in the choices they make. Those passengers who are now struggling to get home and in distress must be recognised as well, but that is the market we are in.

Photo of Nigel Huddleston Nigel Huddleston Conservative, Mid Worcestershire

I thank the Minister for her statement and the reassurances she has given those who are directly impacted. Does she agree that the UK aviation industry is actually a success story? We have the third largest aviation sector in the world and we would like that to continue to be the case. Will she therefore assure me that she and her Department are working with the industry to make sure that it is planning effectively for all Brexit scenarios? Perhaps the Opposition would like to help out on this by reducing uncertainty by voting for the deal.

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My hon. Friend makes a valuable point. People who are nervous about uncertainty need to vote for certainty, which would be the Prime Minister’s deal. We should not undermine the UK aviation sector. It is incredibly healthy, even though there are a number of challenges, especially in respect of how passenger numbers are going up. Interestingly, there is a far more capacity than there are passengers, so shopping around for a good deal is important. What has come out of Flybmi going into administration over the weekend is that we should remember to make sure we are securing our tickets in a way that means they are insured, so that we can get compensation or refunds.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Flybmi’s 50-seater planes carried, on average, only 18 passengers per flight. No airline could carry on on that basis. Although Flybmi’s demise is regrettable and very sad, does the Minister agree that it is important to get it into context? East Midlands airport is a huge success story. It has an expansion programme, and passenger and cargo growth is 8% a year. The airport is located in north-west Leicestershire, which has the fastest economic growth of anywhere outside London and the south-east.

Photo of Nusrat Ghani Nusrat Ghani Parliamentary Under-Secretary (Department for Transport), Assistant Whip (HM Treasury)

My hon. Friend makes a powerful point about his part of the world. He is absolutely right; East Midlands airport is thriving, competitive and nimble when it comes to the changes that passengers require and the kinds of services that they want. Even though it is regrettable that Flybmi went into administration over the weekend, it is important to note that the UK has a very healthy aviation sector.