UK regional airline Flybe is being closely watched by aircraft leasing firms. Following the airline’s request to pause the payment of its air passenger duty (APD) and a more recent bid for £100m loan from the UK government, the owners of its airplanes are getting twitchy. It seems the lessors are monitoring any default on Flybe’s payments, and are ready to step in to prevent aircraft from being repossessed.
The APD ‘holiday’ was not enough
Flybe recently secured a ‘holiday’ from paying its passenger tax (APD). The UK government gave the airline a three-month pause to secure finances to make the payment, thereby giving it a bit of breathing room to claw its way back from its currently precarious financial situation.
Although Flybe fared better than Thomas Cook when it comes to asking for government help, it appears that the airline is not out of the woods yet. The Telegraph is reporting this week that Flybe’s lessors are ‘closely monitoring’ the state of the Exeter based carrier, in fear that their aircraft could be repossessed.
According to Planespotters, Flybe has a fleet of 71 aircraft (including three in storage), the majority of which is made up of 54 De Havilland Canada DHC-8 Dash 8 turboprops. 34 of the Dash 8s are listed as leased. Out of nine Embraer ERJ-170, two are listed as leased, and its two ERJ-190s are also leased. All of its six ATR aircraft are also listed as leased.
This puts almost two-thirds of Flybe’s fleet as being on lease. Clearly, the lessors don’t want their planes to be impounded, as this can be time-consuming and expensive to put right.
Could Flybe planes be impounded?
In short, absolutely. The UK’s Civil Aviation Authority has the ability to impound any aircraft in relation to unpaid debt, regardless of the actual ownership of the plane. It acts on behalf of other companies, ranging from airports to fuel suppliers and more.
One of the biggest companies which could have a claim over Flybe planes is Eurocontrol. The European air traffic management company is responsible for the movement of aircraft around European airspace, and requires debts to be paid within 30 days. Depending on the number of flights, these debts can add up to millions of pounds.
It is this source that the lessors are monitoring. Leasing firms are often granted access to outstanding debts owed to air traffic controllers in order to protect their own interests. Should the airline be seen to default on a payment, lessors could be shaken and may well start demanding their aircraft back.
In the case of Thomas Cook, the first plane was impounded just minutes after the deadline to make payment had passed. In this situation, it was the airport that locked the aircraft down, in relation to unpaid airport charges. However, should Flybe fail to make its payments on time, it seems lessors are poised to step in before the aircraft become impounded.
What’s the situation at Flybe?
Following on from the granting of the APD holiday, it was hoped that the airline would be able to get back on its feet. However, just over a week ago, on the 24th of January, Flybe requested more help from the UK government, this time in the form of a £100m loan.
While rival airlines such as Ryanair have hit out at the ‘bailout’ of the Virgin Atlantic owned airline, Flybe boss Mark Anderson has vehemently defended his position, saying any loan from the state would be on ‘commercial terms’. The airline is awaiting a decision on the loan.
While hopes still run high for Flybe to make a full recovery, there’s still an awful lot of winter to get through before the busy summer period starts again. If the government does not approve the loan, will Flybe have enough capital to see it through?