Paul Swinney argues that the impact of FlyBe collapsing on the places it connects is likely to be overstated.
The collapse of FlyBe has once again led to questions about the negative local economic impact the loss of connectivity will have on places served by the airline. But this impact is likely to be grossly overstated, and have little impact on the Government’s ‘levelling up’ agenda.
The collapse of a business broadly happens for three reasons — the business has been outcompeted, it has been badly managed, or there isn’t enough demand for its product.
The first reason is obviously not the issue here as there aren’t multiple carriers serving many of FlyBe’s routes.
If the second reason is true, then we should expect another operator to come in and turn a profit on these routes with better management. And so there will be no loss of connectivity (after some short term disruption). Indeed, Scottish carrier Loganair will pick up a number of routes as it did after bmibaby collapsed.
If it is the third, then it suggests that there just isn’t the demand for the connectivity in place that FlyBe provided. This in turn would suggest that the likely economic impact of losing the routes is low because few people actually use them (coronavirus may well have created a further ‘shock’ to demand, which could justify short-term government support. But remember the airline was already in trouble).
Some may make the argument that this is in part because Air Passenger Duty pushes the price beyond what people are prepared to pay. This may be true (although not clear cut). But one of the reasons for the duty is there to deal with the environmental impact of flying. And so we should be cautious of calls from businesses who pay the tax for it to be lowered or scrapped — there are competing priorities that the Government needs to balance.
The loss of certain routes will undoubtedly affect some people and businesses. This is unfortunate. But it is unlikely to have large scale effects on the economies that the routes connect, nor have any great impact on the Government’s attempts to level up.
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