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British Airways gets $800,000 payoff in Heathrow quid pro quo

A British Airways Boeing 777 pulling up to the jetway at LF Wade International Airport (File photograph)

Cabinet ministers agreed to pay British Airways $800,000 and grant it rebates on airport fees in exchange for it switching its popular London-Bermuda route to Heathrow.

The “upfront support of $800K and a sliding scale of landing and passenger-fee rebates over five years” was detailed in recently released minutes from a September 2020 meeting of the Bermuda Tourism Authority.

Erin Smith, the BTA’s chief operating officer, was recorded as telling board members that BA asked for “financial assistance” from the Government of Bermuda to continue airlift out of Gatwick.

The request came as BA and other airlines worldwide were seeking bailouts and emergency funding after flights were grounded during the global coronavirus pandemic.

Ms Smith told the meeting there was “no appetite” in the Government, the BTA, the Bermuda Airport Authority or airport operator Skyport “to support the continued service from Gatwick, and an offer was made contingent on moving to Heathrow”.

According to the minutes, Ms Smith said that after weeks of negotiation, the Cabinet approved a “multiyear agreement of upfront support of $800K and a sliding scale of landing and passenger fee rebates over five years”.

The agreement with the airline was announced in September 2020, although the financial details were not shared.

Neville Tyrrell, then the Minister of Transport, said the island’s leading industry groups saw “clear benefits for international business and tourism as a result of this decision, which should prove pivotal in the island’s pandemic recovery”.

The service from Heathrow began in March 2021 and “proved to be a popular move”, according to the Bermuda Airport Authority. Its annual report for 2020-21 said that by the summer, the flight was “regularly exceeding 90 per cent load factors on some days”.

Data from OAG, an airline flight information service provider, showed that the route generated $172 million of revenue from July 2022 to June 2023, the most of any Bermuda air connection.

BTA chief executive Tracy Berkeley said this week that the information about BA’s lump-sum payment and rebates should have been redacted from the meeting minutes, which were disclosed to The Royal Gazette under public access to information.

Lester Nelson, chief executive of the airport authority, said the airline’s name should not have been disclosed by the BTA because of confidentiality, but insisted: “There is no big reveal. It’s in our annual report.”

He pointed to BAA’s financial statements for 2020-21, which he said had been published and available to read on its website for several years, and which refer to an $803,000 payment to a “UK-based carrier”.

“It’s been disclosed in our annual reports and our statements,” Mr Nelson said. “We have audited financial statements and an annual report published on our website.

“We fully disclose our dealings. We have nothing to hide.”

The BAA is funded by an annual multimillion-dollar government grant.

Its financials for 2020-21 state: “Effective September 25, 2020, the [airport] authority entered into an air service development agreement with a UK-based carrier in support of commercial airline service from a major UK international airport.

“The authority was liable for a $400,000 deposit on signing of the agreement and an additional $403,000 on commencement of regular airline service in March 2021.”

The financials add that the agreement “will require the authority to make service fee credit payments, semi-annually in arrears, in support of regularly scheduled airlift from the UK for the period commencing March 28, 2021, and ending April 30, 2025”.

The BTA minutes quote Ms Smith as saying that BA was expected to run a minimum of four flights a week and that if it wanted to return to Gatwick, it would have to repay a “proportionate amount of the upfront support” and the rebates would cease.

“Ms Smith advised that the fee waivers provided by Skyport would likely be subsidised on the back end by the [Government] because of their minimum-revenue agreement and would come from the Air Service Development Fund.”

At the September 2021 BTA board meeting, Ms Smith said BA had increased flights to five days a week at no additional cost to Bermuda.

She told the November 2021 board meeting that the switch from Gatwick to Heathrow, which is Britain’s busiest airport, had provided many more connections to Europe and “could bring recovery from that market forward by two years”.

BA declined to comment for this article.

A Ministry of Transport spokeswoman said: “The individual agreements with the airlines regarding minimum-revenue guarantees are confidential and are not disclosed.

“Minister Wayne Furbert has reiterated that air service development remains a priority for this government."

The Government has paid millions of dollars to airlines to cover the cost of North American routes in the past, when passenger numbers have fallen.

The BAA financials for 2020-21 include information about an agreement with an unnamed US airline in support of regular daily airlift from some North American cities, which resulted in a payout of the maximum guarantee amount of $3 million in September 2020.

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Published February 23, 2024 at 8:02 am (Updated February 23, 2024 at 10:08 am)

British Airways gets $800,000 payoff in Heathrow quid pro quo

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