Collapse of Scottish Airline

As previously reported, FlyGlobespan, Scotland’s largest independent airline, based in Edinburgh, went into administration in December. Initially, it was thought that it had fallen victim to the economic downturn. However, despite the recession, airport passenger traffic has continued to grow at Edinburgh; the only major UK airport where this has been the case. Furthermore, air freight traffic grew by 135% in 2008. Edinburgh hotels have also had a good winter season.It now appears that the collapse of the airline was due to cash flow problems created by the failure of E-Clear, the company that handled FlyGlobespan’s credit card bookings, to hand over £35m (€40.23m/$54.75m) collected from the airline’s customers. In my previous report I pointed out that E-Clear and similar companies delayed payments to airlines unril the passengers had taken their flights as an insurance against the airline’s collapse. It now traspires that this was not the reason for E-Clear’s failure to hand the money over. It appears that the money was being used to to meet financial obligations arising from the previous collapse of two other airlines.E-Clear itself, has now gone into administration, after it failed to produce evidence that it still had the funds collected from FlyGlobespan’s customers at a High Court hearing in England (where the company is based). A BBC investigation revealed that the company owes creditors approximately £100m (€114.94m/ $156.43m) but had only approximately £100,000 (€114,940/ $156,430) in its cash accounts. The BBC also reported that E-Clear had used £1.5m (€1.7235m/ $2.3465m) of its cash to prop up a tour operations business owned by E-Clear’s CEO. That business has also gone into administration. The Independent newspaper has reported that the Serious Fraud Office is considering starting a formal investigation.This whole debacle has raised the question of why the financial regulators had failed to prevent this. The Scottish Government are pressing the UK Government to investigate this.John

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