Although the news broke with a bang on the night of Friday 14th November, it now seems clear the collapse of Blue Islands was many months in the making. This week the government published a timeline of what happened when, and what options it believed it had.
In a nutshell, the airline formally raised a red flag about its cashflow in October of last year. It needed more money, and was up for sale – although presumably the government was aware of the impending trouble much earlier than that, since we learnt this week that it had put representatives on Blue Islands’ Board back in 2020.
That was done specifically to monitor a Covid loan of up to £10m; £7m (plus interest of £0.4m) is still outstanding. The fact the adequate monitoring of that loan was later criticised by the Comptroller and Auditor General needs further explanation.
Despite receiving support through extended credit terms, by the summer of this year, the airline was in even deeper trouble, and the government was now looking at four scenarios – a sale to Aurigny, a sale to Loganair, providing more taxpayers’ money or doing nothing. In September, the airline got more support in the form of £1.2m from the government and further payment deferrals, without which we are told, it would have collapsed.
Still more public money, £1.5m, was agreed on 7th November, but in the end only a third was ever paid – because exactly a week later, Ministers met to decide enough was enough. No more money would be paid, and the airline would not be taken into public ownership, something which apparently Blue Islands supported. They say they were not prepared to take further risks with public money, and that left only one option on the table: liquidation, and Loganair coming in to provide services quickly, which it seems it was now ready to do, giving the government a little flexibility.
The fact that much information has now emerged is to be welcomed, although we are still to hear Blue Islands’ side of this story, and that remains an important part of the picture; it shows that the airline’s final collapse was actually neither surprising nor unexpected. And it shows how easy it is for the Government to be caught between a rock and various hard places, not wanting to keep providing more money, to lose more routes or to buy an airline; and in effect, having to buy its way out, by supporting Loganair to step in quickly.
