The franchise agreement between Blue Islands and Flybe is to be investigated by the regulator to see if it breaks the Island's competition law.
It's proved to be a controversial arrangement on the Island's key air route between Jersey and Guernsey, which sees flights booked using Flybe's system, but flown by Blue Islands' crew (in Flybe uniforms), and on Blue Islands' aircraft (branded as Flybe).
Airport statistics show that the number of passengers travelling between Jersey and Guernsey has fallen significantly since 2008. In that year there were 160,000 passengers on the route, but by last year that had fallen to 120,000, a drop of 25%.
The airlines argue that the franchise agreement is the most efficient way of operating the route, as it is an expensive one for them to fly, and they already provide more seats than there is demand.
But now the Channel Islands' Competition and Regulatory Authorities (CICRA) are to launch a formal investigation, as they believe, "...there is reasonable cause to suspect the Jersey competition law may have been contravened by the arrangement."
CICRA says the franchise agreement, "...may have restricted competitive choices, including schedules and which routes the competitors can fly."
A few months ago the regulator published an open letter asking the airlines to explain how their agreement benefitted the public but it says the replies were not satisfactory.
CICRA Chief Executive, Michael Byrne, said; “We only initiate formal action as a last resort when other options have been exhausted. Having considered the information available to us, including the airlines’ responses to our open letter we have concluded that there is reasonable cause to suspect that there may have been a contravention of competition law,” he said.
“The responses from Flybe and Blue Islands to our letter have failed to provide sufficient assurance that consumers have benefited from the agreement between these two competitors. We will now look at all restrictions in the agreement in more detail and consider whether the competition law has been breached.” “If competitors are going to engage in such cooperative arrangements then at the very least consumers need to get better assurances on how they benefit from them.”
“To date, in our view Flybe and Blue Islands have failed to commit to or convincingly explain the benefits to consumers.”
If the competition law has been broken, CICRA has the power to impose a fine of up to 10% of a business's turnover, for a maximum of three years.
Blue Islands has been approached for a comment, and is yet to respond.
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