Flybe: Rival airline calls rescue 'misuse of public funds'

The bailout of airline Flybe has been branded a "misuse of public funds" by a rival, as environmental campaigners also criticised the move.

Willie Walsh, the chief executive of the owner of British Airways, attacked the government's plan in a letter to Transport Secretary Grant Shapps.

The rescue defers some tax payments, thought to top £100m.

Green Party MP Caroline Lucas attacked the government's proposal to cut a passenger tax.

In his letter, Mr Walsh said: "Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes.

"Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline. This is a blatant misuse of public funds.

"Flybe's precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built."

Why Flybe matters

'I would be devastated if it went under' Three Cabinet ministers - Mr Shapps, Business Secretary Andrea Leadsom and Chancellor Sajid Javid signed off on the deal that will keep Flybe operating. Although the terms of the direct assistance were not disclosed, they are understood to include forbearance on Flybe's Air Passenger Duty (APD) payments.

Airlines collect the duty from passengers as part of their ticket price, and then hand it over to HMRC. It is understood Flybe could be given up to three months' breathing space to pay about £100m worth of duty. The ministers have also agreed to review the future of £26 air passenger duties on domestic flights in a move attacked by environmental campaigners.

Ms Leadsom defended the decision to intervene, saying that Flybe was a "viable business". She also said Flybe's situation was different to that faced by travel firm Thomas Cook, which collapsed last year. "The difference... between Flybe and Thomas Cook was that in the case of Thomas Cook it had huge amounts of debt, and any taxpayer's money would simply be throwing good money after bad."

However, in a tweet, Caroline Lucas said: "Addressing Flybe problems by reducing APD on all domestic flights is utterly inconsistent with any serious commitment to tackle the Climate Crisis.

"Domestic flights need to be reduced, not made cheaper." The government has said the review of the tax will be consistent with its zero-carbon targets. Profitable owners

Flybe's owners - Virgin Atlantic, Cyrus Capital and Stobart Air - will inject about £20m of new money.

In his letter, Mr Walsh pointed out that Virgin is part- owned by US carrier Delta Air Lines, which is one of the world's largest and most profitable airlines.

He argues that Virgin and Delta together have the resources to rescue Flybe, and they should not be asking for taxpayer support. Mr Walsh says Flybe has been mismanaged.

Flybe is already in receipt of some public money for its important NewquayHeathrow route, which it operates under a "public service obligation" contract with the government.