5 March 2020

Flybe’s collapse shows the potential for divisions in the Tories’ electoral coalition

The Conservatives now have the same problem as Labour: they have to balance environmental concerns with “levelling up”.

Flybe aircraft are pictured on the tarmac at Exeter airport in Exeter, south-west England on March 5, 2020, following the news that the airline had collapsed into bankruptcy. - British regional airline Flybe crashed into bankruptcy Thursday after the deadly coronavirus proved to be the final nail in its coffin. The biggest operator of UK domestic flights said it has sunk into administration -- a last-ditch process aimed at salvaging at least some of the company. (Photo by GEOFF CADDICK / AFP) (Photo by GEOFF CADDICK/AFP via Getty Images)

The reason why the government today refused to bail out the UK airline Flybe is quite simple: the business was not working. Flybe ran unprofitable domestic flights that incurred disproportionate taxes. It had bought too many planes. A weak pound had increased fuel costs. Many other low-cost airlines competed with it on more popular and profitable routes.

But the decision to allow Flybe to fold will attract criticism from uncomfortable quarters. It sits uneasily with the government’s “levelling up” agenda and particularly badly with the new crop of northern and Midlands Conservative MPs whose constituencies benefit from Flybe’s routes.

For example, after the initial rescue package was announced last month, a franchise called Eastern Airlines launched new flights in collaboration with Flybe to Teesside airport – a newly-Conservative part of the country. The tweet that Ben Houchen, the Conservative mayor for Tees Valley, has chosen to pin to his Twitter profile is an image of him outside the newly-built airport. Connectivity is the very thing that “Blue Collar” politicians tend to sell themselves on.

So how can the government sell this unpopular decision? As I wrote last week about the impending Flybe crisis, there was a clear environmental case for allowing the airline to fail – one that could just be popular among the One Nation wing of the party. But among Blue Collar Conservatives that argument does not satisfy. After all, today it was reported in the Sun that 53 MPs have written to Chancellor Rishi Sunak urging him not raise fuel duty in next week’s Budget.

Some have sought to blame a familiar foe: the EU. The argument runs that European state aid rules have prevented the government from taking a more interventionist approach and that, were this crisis to have happened next year, Boris Johnson would have stumped up the cash.

“I know the government had been in talks with the airline throughout the day yesterday and that they were prepared to support the airline within what they are currently able to do legally under EU state aid rules we are still subject to,” said Steve Double, the Conservative MP for St Austell and Newquay, whose constituency airport is particularly reliant on Flybe.

EU state aid rules are complicated – and therefore a helpful bogeyman for British politicians – but it is quite clear they did not stop the government from intervening. Since 2014, there have been clear provisions that allow for state aid when regional airlines are threatened (they can be found here). In September, the German government was allowed to bail out the airline Condor to the tune of €380m (while its British parent company Thomas Cook folded). And in 2017 the German government was allowed to lend Air Berlin €150m to see the airline through to a managed insolvency six months later. European courts do not stop state interventionism in aviation.

For a few more months, the Conservatives’ electoral coalition can be held together by mutual disdain for European rules. But this time next year, the excuses will no longer exist. And the Conservatives will have the same problem as Labour: they will need to balance the interests of the ecologically minded with those who want to “level up” the country. That is no easy game.