Why the government saved Flybe but not Thomas Cook

Jan 17, 2020

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On Tuesday night, the U.K. government saved Flybe from collapse. The bailout came only four months after Thomas Cook could not be saved from bankruptcy.

Though very different in terms of business model, routes, and fleet size, the two were — and are — very important players in the U.K. aviation industry. According to Statista, in 2018 (the last full year that both airlines were in operation), Flybe carried 9.1 million passengers and Thomas Cook carried 8.1 million.

In terms of staff numbers, Thomas Cook employed 21,000 staff around the world and Flybe has around 2,400, meaning that thousands of people were left jobless overnight in the case of Thomas Cook.

When Thomas Cook ceased to exist in September, 150,000 Brits were left stranded, sparking the largest repatriation effort in Civil Aviation Authority history.

So, that begs the questions, why save one and not the other?

Related reading: A review of Flybe’s Dash 8 from Heathrow to Aberdeen

It appears that the main reason comes down to the debt that Thomas Cook owed, which is reported to have amounted to around £9 billion.

Andrea Leadsom, the U.K.’s secretary of state for business told the BBC that saving Flybe made sense because the airline was a “viable business”.

“The difference… between Flybe and Thomas Cook was that in the case of Thomas Cook it had huge amounts of debt, and any taxpayer’s money would simply be throwing good money after bad”, Leadsom said.

Following the decision to bailout Flybe, there has been backlash from rival airlines, politicians and even the rail industry. Among the concerns is the misuse of taxpayers’ money and environmental issues, among others.

Low-cost airlines EasyJet and Ryanair, which also operate regionally in the U.K., have expressed concern over the use of taxpayers’ money to save Flybe, with Ryanair suggesting there should be “more robust and frequent stress tests on financially weak airlines and tour operators so the taxpayer does not have to bail them out”.

Meanwhile, Wille Walsh, the current chief executive of IAG, wrote to Transport Secretary Grant Scapps, scrutinising the government’s intervention in the saving of Flybe. According to the BBC, he included the accusation that “Flybe’s precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built”.

Additionally, some have commented on the fairness of using taxpayer money to save an airline when Virgin Atlantic, one of Flybe’s biggest investors, has Delta, one of the world’s most profitable airlines, as one of its main shareholders. Flybe’s owner said it will inject £30 million of new money into the airline.

Downing Street responded, stating that the government has been “fully compliant” with state aid rules.

Environmental concerns have been raised by politicians and the Rail Delivery Group in that encouraging “more people to fly domestically would limit efforts to tackle the climate crisis”.

While some may call saving Flybe and not Thomas Cook unfair, another loss of a U.K.-based airline would have been devastating for the aviation industry — more job losses and the loss of some crucial, regional transport links that U.K. citizens outside of London rely on.

Featured image by Bloomberg/Getty Images

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