Council plans to sell airport fuel faces legal action

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The council has been threatened with legal action if it carries through its money-making scheme to sell aviation fuel at Oban Airport.

Argyll and Bute Council’s cost-cutting budget, unanimously agreed last month, set out plans to take over selling fuel at the airport in North Connel, and reduce the subsidy for island flights when the contract is re-tendered.

The council subsidises ‘lifeline’ flights between the airports it owns, near Oban and on the Isles of Coll and Colonsay, under its three year public service obligation (PSO) contract with Hebridean Air Services, which also flies regular scheduled flights from Oban to Tiree and Islay.

A council report said: ‘The PSO Air Services contract is due to be retendered June 2018 and negotiations have commenced with the provider to agree a one year extension. Following this there will be an opportunity to agree a fix price contract and seek market to provide level of timetable that could be afforded by the budget.’ The current £737,000 budget for air services would be reduced over three years, from £667k to £597k to £527k.

Officers identified a number of risks, including ‘a reduced timetable’, fare increases, and that ‘fragile Islands depopulate and increase economic decline with no direct and efficient access to healthcare, education, employment and support for tourism’.

Flights to Coll, Colonsay and Tiree were almost suspended during the council’s last negotiations in 2015, when Hebridean Air Services (HAS) walked out demanding a substantial increase in the council’s £2.121m subsidy, but both parties agreed to continue the service for ‘over £2 million’.

The council’s budget also plans to ‘generate increased revenue from fuel sales at Oban Airport’: ‘TLC currently provide fuel at the airport however their sole supply contract has now lapsed. The council could opt to supply the PSO contract only as TLC has fuel farm lease to 2020 and therefore will still be offering a fuel supply. A new post to administer fuel would have to be created and funded through income.

‘There is the potential for the council to offer a competing fuel supply prior to May 2020 for visiting aviation aircraft at Oban airport. The cost for the supply of a fuel storage tank facility and bowser would be added to the price per litre that the fuel is purchased from a fuel company.

‘It is anticipated that the decision to sell fuel at the airport will not be welcome by all parties.’

Paul Keegan, owner of the fuel supplier Total Logistics Concepts (TLC), said it was against the law for local authorities to compete against private companies.

‘We would legally object to the council proposals under the ‘State Aid’ legislation in that they would be using public money to finance a project that is currently and in the future could be provided by a private company.’

The council’s budget also proposes building a £150k-£200k hangar at Oban Airport, to generate income by hiring space to ‘the islands air services operator’, visiting aircraft, Fly Scenic Scotland which offers sightseeing flights, and Border Air which gives flying lessons.

Mr Keegan said: ‘This again would bring them into competition with the existing hangar space available and new hangar space that is currently being built by an existing airport resident. As the council would not have had to find capital from private funds for either project they would of course be able to undercut the price of any existing provision in either fuel supply or hangar space.

‘Collectively the fuel and hangarage proposals will require somewhere in the region of £400K in capital funding before running costs are taken into account.’

A council spokesperson said: ‘The airport is owned and operated by the council. We are always open to new business at the airport and are taking forward transformational proposals that have recently been approved unanimously by the council at their budget meeting. No decisions have been taken on how this will be operated. TLC still have a lease at the airport and this is unaffected. We are planning to maximize the economic potential of the airport to generate additional income to support the delivery of council services.’