Lower fares NOT an option to longer runway

A front page article in the Guernsey Press headed ‘Lower fares option to longer runway’ states that ‘A STATES-FUNDED reduction in air fares could be introduced rather than a runway extension, but it could cost around £8m. a year.

The suggestion is that there could be direct subsidy for airlines instead of a runway extension. It quotes a £10 reduction per ticket costing £8m a year. This pronouncement is quite extraordinary!

It would be more expensive than an extension in less than a decade. It would be less impactful (a £10 saving is scarcely going to make a game changing difference and turn Guernsey into a vibrant economy to which tourists and business would flock. And it would be less sustainable – surely Guernsey wouldn’t commit to spending £8m a year in perpetuity. Perhaps most importantly, it would probably be illegal – certainly if applied only to Aurigny.

This surely also raises other issues:

Aurigny Group is perpetually ‘recapitalized’ and not ‘subsidised’, but:

  1. do Aurigny ever pay these loans back?
  2. if the loans are written off, does this not constitute a subsidy through the back door? (in practical terms it would appear to)?
  3. if this is so, does it not fall foul of UK competition laws?

Public sector operator subsidies are allowed on PSO/lifeline routes which could never make a profit, but this cannot really be claimed for Guernsey. Route support is allowed to start up new routes for a while until routes are profitable or abandoned, usually scaled over three years, but that is not this case. Subsidies can also be given as ‘route support’ i.e. reduced landing fees, but these have to be available to every airline.

It may be because of the above that Alastair Ford, Head of Shareholder Executive of States’ Trading Assets, was quoted by the Press as saying “That could conceivably include States funding to reduce fares on any service, not just those offered by Aurigny”.

Examining more of the proposals as quoted in the Guernsey press creates little confidence in the depth or soundness of any reasoning behind them.

There is a comparison between “infrastructure options” and “market based options” when “addressing concerns about airlinks” and this is a preference for the latter. This, though, suggests a belief that you can improve things just by improving routes, or increasing publicity, to attract traffic – and that this is actually viable. But you won’t get routes unless you can land the planes and this approach has surely already been tried with the existing runway length, and has not worked – eg, London City and other regional UK airports, and the reduction of passenger numbers in the face of all the marketing efforts of VisitGuernsey.

Just offering holiday routes to Norwich (or wherever else Aurigny’s marketing people think they can offer for a weekly service in the summer as a gimmick) is not going either to make Aurigny profitable or increase the tourist and business traffic to Guernsey.

This suggestion of knocking £10 off air fares, rather than build a runway extension and move Guernsey at least some way towards the 21st century, is either populist or pathetically naive thinking, and just calculated to bring about another kick of the can down the road, as usual.

This suggestion has been given front page coverage by the Guernsey Press. It is sad that the 2020 Association’s “Fact Check”, in which it compared the PwC Report on extending the runway, with the P&R statement made to the States in regard to this report before it was made public, has not been thought to be worth similar reporting.

© 2019 The 2020 Association

One thought on “Lower fares NOT an option to longer runway”

  1. The problem is that even if the runway is extended to allow the jets of Ryanair, Norwegian and Easyjet, those airlines will not come without huge discounts on airport fees AND marketing contributions. This is a fact of life.

    Easyjet, were interested in coming to Guernsey without a runway extension but on the Gatwick route AND with discounted airport fees. ( For them it was a new route so they expect incentives ). That is a fact of life.

    Slash the airport fees and claw back the money from the increased number of tourists who will come… see my post further below for details.

    https://guernseypress.com/news/voices/readers-letters/2018/07/26/open-skies-is-a-start–now-slash-airport-fees/?fbclid=IwAR0Q2_FI43FVTSedMD9Sxmc4lxLaSNtR3TREVED07aMXTGFIEHgHLg2UO2w

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