British Airways is being paid £125,000 ($162,000) per month to operate domestic flights between London and Newquay. Cornwall Council is funding the amount to ensure services between the two airports under a public service obligation. At just 210 miles as the crow flies, the route is one of the British flag carrier’s shorter offerings.
A large hole was left in the United Kingdom’s regional connectivity following the collapse of local carrier Flybe. The airline had been connecting small regional airports up and down the United Kingdom, and even abroad. Now, British Airways has stepped in to fill the gap of London to Newquay services.
£4000 per flight
British Airways is receiving a hefty fund to operate flights to and from Newquay from Cornwall Council. Simple Flying initially revealed that British Airways would be launching flights to Newquay back in February. This was before the collapse of Flybe. However, since then, the airline has signed a public service obligation with the local council.
The order was first spotted by Head For Points‘ Rob Burgess, who shared it on LinkedIn. Essentially, under the emergency order, the council will be paying British Airways £877,596.00 ($1,135,319), excluding VAT, to operate services to Newquay for seven months.
According to details on the European Union’s Tenders Electronic Daily, the seven-month contract was issued as a result of the collapse of Flybe. Only one compliant bid, that of British Airways, was received in the 48 hours that the proposal was open.
Rob from Head For Points calculated that the deal is worth around £4,000 ($5,175) per flight to British Airways, on top of the revenue the airline receives from ticket sales.
What is a public service order?
According to the European Union,
“In order to maintain appropriate scheduled air services on routes which are vital for the economic development of the region they serve, Member States may impose public service obligations on these routes… In case no air carrier is interested in operating the route on which the obligations have been imposed, the Member State concerned may restrict the access to the route to a single air carrier and compensate its operational losses resulting from the PSO.”
Flybe’s previous PSO
According to a list of PSOs as of September 18th, 2019, Flybe held the PSO for the Heathrow to Newquay route from October 26th, 2018. It was due to hold on to it until October 25th, 2022, however, declared bankruptcy earlier this year. Four bids were received in the initial tender process.
Flybe’s PSO required it to offer 231,516 seats per year across 19 weekly return frequencies. The airline provided 258,420 seats in 2018. However, it only carried 173,446 passengers. This gave it a load factor of 74.92%. The agreed amount of €708,652.28 ($830,866) was only to be paid out if Flybe didn’t make a reasonable profit on the route. As such, the airline received just €4.09 ($4.80) per passenger in 2018.
What do you make of the PSO? Let us know your thoughts in the comments!
