To be honest here I’ve no idea of the answer to that question. But I do know that it’s the right question to be asking. It also appears to be the question no one is asking.
FlyBe is pretty much bust. So, the deal is that they can pay the air passenger duty they have already collected in bits over time. Well, ho hum, whatever.
But now to the next bit. As Larry Elliott says:
The chancellor, Sajid Javid, has said he will consider scrapping air passenger duty (APT) on domestic flights as part of his March budget.
Would tossing this particular lifeline to Flybe allow Boris Johnson to escape the charge that he is a southern toff who is not remotely serious about levelling up the regions? Yes, it would. Would it be consistent with the aim of tackling the climate emergency? Not remotely.
The best tax systems are those that penalise things a country wants less of while encouraging things it wants more of. Scrapping APT would do the opposite: indeed it would be both environmentally damaging and regressive, since it is the better-off – on average – who fly intercity in the UK.
APT is not the world’s best-designed green tax, but at least it recognises that there are hidden costs to air travel, and that those doing the polluting should pay. Scrapping the £13 charge on domestic flights would, according to the basic laws of economics, encourage more people to fly. On the other hand, allowing Flybe to go to the wall would hack off a lot of voters, many of whom have just broken the habit of a lifetime and voted Tory.
But what’s the lifeline?
Abolishing APT would not mean that FlyBe could carry on charging the same (total) amount for a flight as it does now and then pocket the sum not being sent to the Treasury. It does actually face competition.
Rather, not charging APT will encourage, enabler perhaps, some who currently don’t fly to fly. It is the revenue from these extra passengers which will flow through into FlyBe’s pockets.
And how much is that? The answer being whatever is the price elasticity of demand of domestic air travel. How much extra domestic air travel will there be as a result of a cut in the price?
I dunno, perhaps no one does. But that is the actual question here. For without knowing the answer we don’t know whether reducing or eliminating APT will do anything at all for FlyBe’s finances.