ICSM Transport Insolvency News: Regional Airline goes bust owing over £25m - joining a long list that have crashed
By Harry Mottram: Premier League football teams and top flight Rugby Union clubs would jet to their fixtures on the continent by Eastern Airways charter flights – but not anymore. The company has gone bust with around £29m in liabilities despite it receiving subsidies from the Government as a regional airline servicing routes from Newquay in Cornwall, London Southend, Teesside, Newquay, Jersey, Aberdeen and Wick to the continent and to Heathrow. Now their 1.3 million customers will be left grounded and potentially many without their prepaid tickets along with the suppliers of just about anything from fuel to airline food and drink.
The 250 employees have been made redundant while those not on the payroll but who rely on work from Eastern Airlines are also out of pocket. The airlines’ total debt rose by £4.8million to £25.97million, while profits fell to £454,000 from £1.55million a year earlier reported the Daily Mail. The question many will ask is why do airlines get into financial difficulties when many of their regular routes popular with the public while other routes are vital lifelines to far flung destinations? Like so often there are usually more than one factor involved said ICSM’s Ian Carrotte.
He said volatile oil prices, high fixed overheads and maintenance of highly expensive aircraft all add to the problems. However, there’s a universal issue faced by all companies both large and small: debt.
“With potentially millions owed to a variety of firms, suppliers, airports and lenders – including the Government,” he explained, “the likely problem is servicing debt. It takes away a big chunk of the turnover and if interest rates rise then there’s a nasty surprise for the financial directors. The key is to keep lending under control – and it is interesting to note the firm’s debt had more than quadrupled to over twenty-five million in the last financial year while at the same time they were looking to launch new flights from Newquay, Cornwall to London Southend Airport, Essex.”
Earlier this year Icelandic airline Play went into administration cancelling their flights from Scotland’s Glasgow Airport and leaving 500 staff out of a job. In 2023 Birmingham based Flybe crashed leaving hundreds without a flight – and airports with unpaid bills. They join a long list of airlines that have collapsed in the uK that includes Air Bristol, Air Caledonian, Air Foyle, Air Scandic, Air Southwest and bmi Regional – and it’s nothing new since Avro went bust back in 1920.
Ian Carrotte said: “Regional airlines have a problem in that they have the high overheads of the bigger operators but with fewer passengers. Covid, hikes in interest rates and fuel costs can hit the bottom line but with fewer passengers on some routes like Cornwall to London where there is strong competition from road and rail links the public are reluctant to pay high ticket prices if there is an alternative.”
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