Questions over funding given to Blue Islands

Blue Islands collapsed with a total government debt of £9.1m

Serious questions need to be asked about the amount of public money given to an airline before its collapse, according to the politician who reviews economic policy.

Deputy Montfort Tadier, the chairman of Jersey's Economic and International Affairs Scrutiny Panel, said it was clear Blue Islands faced "underlying issues" when it was loaned money in September.

The Government of Jersey confirmed it gave the airline £1.7m since September, including £500,000 lent a week before it ceased trading on 14 November.

Treasury Minister Elaine Millar said in a statement the airline had been working on a "sale process" for the past year that had been supported by deferred repayments and loans.

Deputy Montfort Tadier asked whether the government had been "throwing good money after bad"

Deputy Millar also confirmed the government had agreed to provide up to £1.5m to Loganair for the rescue services they provided after the collapse of Blue Islands.

Deputy Tadier said the viability of regional airlines and their relationship with the government needed to be looked at.

Speaking about recent loans given to Blue Islands, he said: "It should have been quite apparent at some point this was a sticking plaster and there was a bigger underlying issue.

"These are not small amounts of money we're talking about.

"So it's a case of at that point should they have known that this was throwing good money after bad?"

Combined with loans given to the airline in the pandemic, Blue Islands collapsed with a total government debt of £9.1m.

Deputy Jonathan Renouf, who sits on the Corporate Services Scrutiny Panel, said the government held a confidential briefing with the panel to warn of "significant difficulties with the airline".

He agreed the government needed to be more transparent about how much money it had given both airlines.

"Now that the situation has become public the government should be as transparent as they possibly can about what payments to whom and for what purpose," he said.

"Corporate services will be pursuing those questions."

'Secured the future'

Deputy Millar said in a statement the airlines had been working on a sale process "to try to secure a sustainable future for the business" and the government had supported that process "by deferring loan repayments and providing funding to support liquidity in recent months".

"Blue Islands was unable to find a buyer without further significant funding being required by government, and it was not possible to justify taking Blue Islands into public ownership or investing further public funds into it," she said.

"During this period, government and Ports of Jersey have worked to ensure that a solution to sustaining connectivity was available."

She said the £1.5m loan to Loganair aimed to "accelerate their full entry into the Jersey market from up to 60 days to within 48 hours".

"In so doing, we have secured the future of the island's regional connectivity," she said.

"Government's contribution to Loganair recognises that they are commencing operations during a quieter period of the year and will face substantial set-up costs, far in excess of this funding, including the need to lease an additional aircraft on a more expensive short-term basis to provide capacity while their long-term operating model is put in place."