More competition? That'll cost us £1m a year!

Monday 03 October 2016

Local airline Blue Islands has published a long and detailed defence of its inter-island record after a large number of delays and cancellations over the summer led the regulator to publish a stinging rebuke, questioning its performance.

The airline argues that its relationship with Flybe is misunderstood, and misrepresented by the media. The two companies have a franchise agreement which means than the seats between Jersey and Guernsey are sold on the Flybe system, but flown by Blue Island's crew (in Flybe uniforms), and on Blue Islands' aircraft (branded as Flybe).

But the main body of the letter deals with competition on the route, and argues that there is already too many seats for the number of passengers, with Blue Islands offering six flights a day (each way) between the Islands, with 40% of the 552 seats being empty.

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%.

They argue that if the States want more capacity on the route, they should underwrite the losses:

"Despite the abundance in seats, we hear calls from various corners for Aurigny to return to this route. Were this to take place we would inevitably return to the position whereby we estimate each operator would lose over £1 million per annum for no gain whatsoever.

"If the States of Guernsey and Jersey were to conclude that there is a need for a level of capacity on the inter-island route well above that which can be commercially justified, then Blue Islands would be willing to enter into discussion with both parties on how we could facilitate this additional capacity, provided that the resulting losses were to be underwritten. Blue Islands contend that this approach, as opposed to the re-introduction of Aurigny to the route, would offer the best value for money to Channel Islanders."

On fares, the airline blames the high costs of operating the route for the level of its fares:

"Whilst the cost of fuel in the Channel Islands is the highest on our network, the fact that an inter-island flight is only a short distance is only a small factor on the overall cost to Blue Islands of operating an inter-island flight. The charges at Guernsey and Jersey airports are the highest on our network and consume approximately one third of the current average fare on an inter-island flight. Another third is attributable to various third party suppliers such as ground handling and fuel and other direct operating costs. The final third contributes towards aircraft, salaries, engineering, maintenance, insurance, rent, administration and infrastructure. 

"Blue Islands is entirely open to a discussion with the States of Guernsey and States of Jersey on how lower fares could be offered on the inter-island route should there be a contribution made to the operating costs of the route. Such a contribution could be made through a reduction in airport fees or an explicit subsidy towards the costs of operation that would be passed on to consumers."

And in terms of punctuality, the airline argues it has made a substantial investment in its fleet, and actually has a very good record:

"The issues faced by Blue Islands over the summer with unprecedented levels of weather disruption being compounded by unforeseeable technical issues and the failure of a lessor to deliver a further aircraft at the agreed time are well documented and have been covered extensively in the local media.

"Blue Islands has taken robust steps to address these issues, including significant investment in procuring a long term standby aircraft from a third party operator to restore resilience to the Blue Islands fleet. This has allowed Blue Islands to return to historic levels of reliability with 93% of inter-island flights departing within the industry standard 15 minutes of scheduled departure time between the 8^th August and 7^th September (inclusive). This figure rises to 96% when excluding those services that were delayed due to weather conditions outside of Blue Islands’ control."

Finally, the airline defends it's arrangement with Flybe, setting out the benefits to customers:

"...passengers benefit from the Franchise in a number of ways:

1)     Bookings can be made through a single reservations system, as opposed to the historic need to book one flight through Blue Islands’ reservation system and then the second through Flybe’s

2)     Baggage is checked through to final destination

3)     In the event of disruption to either of the flights within the booking, passengers can rest assured that they will be re-accommodated to the next available service entirely free of charge. This stands in stark contrast to a situation using a point-to-point model where a passenger books two separate flights with different airlines as there is no obligation on either airline to compensate or accommodate the passenger in the event of a missed connection.

4)     When booking a through ticket from the Channel Islands to a UK airport in order to then connect to another service there are significant savings in the UK Government Air Passenger Duty (APD) tax. Channel Islanders are able to save up to £26 (APD) per person on a return connecting itinerary as a result of the Franchise agreement."

You can read the full Blue Islands' letter here.