The BBC has gained sight of the not-yet published draft Government Report on Plymouth Airport. In its coverage the BBC implied that commercial air services at Plymouth would not be viable without subsidy - £9M of subsidy. FlyPlymouth has long argued that air services are viable without subsidy. So what is going on?
The main point: FlyPlymouth does not need subsidy
First of all let us clarify that FlyPlymouth does not seek any funding from the local authority or ongoing operational subsidy from national government. We have however proposed a package of private funding and Government start-up support to get the airport and airline to breakeven. It is misleading of the BBC to imply the airport and airline would not be profitable especially in light of their misquotation of a leaked draft document.
Our response below addresses 3 key points to clarify why this is the case:
1. Department for Transport: “the door is open”
In April 2015 – the month following the announcement that the DfT would look at Plymouth Airport’s viability, the then Transport Secretary spoke to the press at Plymouth Airport saying that the door was open for public funding to help restart air services for Plymouth.
Specifically he said: “We have looked at a public service obligation (PSO) as far as Newquay is concerned with a deal with Cornwall Council and I will not rule that out for services coming into Plymouth [...] we would need to go through due process but the fact that it is in operation already means the door is open [...] I think things have changed in the aviation industry […] we are seeing from a lot of areas how important regional airports are and regional connectivity. You only need to look at Newquay and Exeter [...] If there is something we can do in Plymouth then I’m keen to see it happen.” (see bottom of this article for links).
So, while the Local Authority, Plymouth City Council has said it wants to see a robust fully funded plan from the private sector and will not/cannot fund future air operations, the Department for Transport has been keen to support regional aviation where it can. It has invited Plymouth to make its case – after all, what is so special about Plymouth that it should not benefit from regular transport funding?
2. Operational Subsidy vs Startup Aid?
There are two kinds of government financial support. One is start-up funding (Grants, loans and Regional Air Connectivity Funding), the other is subsidy for ongoing operations that would otherwise be loss making (Public Service Obligations).
The government regularly helps fund all kinds of private start up activities as it knows this creates jobs and growth and can reduce costs elsewhere. From research and development funding to innovation in healthcare grants to regional growth funding, one of the roles of government is to stimulate the private sector. And it is a regular partner in transport startups.
So, when a few months after the Transport Secretary’s statements, FlyPlymouth submitted its plan as part of the DfT Study, it submitted a particular version of the plan which showed how we would fast-track the reintroduction of commercial air services – that involved acquiring, recommissioning and reopening Plymouth Airport and creating a new base airline within two years. This plan comprised a package of private sector investment supported by Government funds in the form of loans and Regional Air Connectivity Funding (RACF). The RACF would support the airline through the first three years of operations into breakeven.
The loans - which are repayable - would help secure private sector investment making this go further. The RACF (see link below) is a DfT structured fund designed to assist new regional airline routes get to break even by supporting the early years in which passengers are beginning to use the services. The DfT created this fund because it recognises that it is both needed and provides a huge return on value to the economy. And RACF generates air passenger duties that see the public purse reimbursed many times over. So both the Loans and RACF have payback to the Government. This is very different to Government bailing out a loss-making operation.
3. No Ongoing Operational Subsidy
But the key to the plan submitted by FlyPlymouth to the DfT – and the point that the BBC missed - is that it would get the airport and airline to breakeven and into profit so that it would operate profitably on an ongoing basis WITHOUTH the need for an ongoing subsidy.
Now, the Department for Transport also regularly subsidises a good number of otherwise loss-making regional aviation routes – including the Newquay to Gatwick service which would otherwise be unviable without subsidy. But while these subsidies exist, FlyPlymouth chose NOT to assume that it might make use of them and made the plan stand up on its own. There is no reason why Plymouth should be a special stand-alone case for zero support, but that was our plan.
The BBC should properly have quoted the DfT Study as saying that air services would not have been viable without subsidy ‘IN THE EARLY YEARS’. That is because our plan requested Government startup support to break even through the first three years. Just like the Transport Secretary implied would be expected of us.
Where Does that Leave Us?
Oddly enough, all of this is largely immaterial now because the Government has decided not to look at the viability of Plymouth Airport, but of Scheduled Passenger Air Services to and from Plymouth Airport. The Local Authority meanwhile has safeguarded the airport for GENERAL AVIATION use until 2031 – which means all aviation BUT scheduled services. So the DfT Study when it is published will not inform the local process which is all about GA.
And FlyPlymouth has submitted its plan to acquire the airport and reinstate General Aviation through the use of private funds. And as it stands, our airport-only plan does not require subsidy national or local, start up or ongoing! That said, we are smart enough to reserve the right to accept Government help with either our airport or airline plans should it be offered! The door is open, as they say.
The Transport Secretary at Plymouth Airport:
Launch of the Regional Air Connectivity Fund