Oxygen masks for Flybe

Treasury come to the rescue with review of air passenger duty

FLYBE avoided becoming the second UK airline to go bust in just three months after being delivered a life-line from the government.

The Treasury announced on Tuesday evening that the lossmaking regional carrier would continue operating after agreeing to review air passenger duty (APD).

Flybe shareholders agreed to inject extra capital into the airline business as a result, securing the short-term future of 2,400 jobs.

Flybe is owned by Connect Airways, a consortium involving Virgin, Stobart Aviation and Cyrus Capitals, which purchased the airline at the start of last year.

Flybe focuses mainly on domestic flights in the UK, but does have several international destinations including Spain - although it currently has flights from Alicante-Elche.

The Prime Minister's official spokesman said: "The actions we have taken will support and enhance regional connectivity across the UK so local communities have the domestic transport connections they rely on.

"Any changes implemented as a result of our reviews of air passenger duty and regional connectivity will apply to all airlines in the competitive aviation market."

Downing Street has insisted there has been 'no state aid to Flybe' and any support that is given to the firm would be on 'strictly commercial terms'.

However, British Airways owner International Airlines Group (IAG) has filed a complaint with the European Union over the Government's decision to rescue Flybe.

The PA news agency understands that IAG has claimed to the European Commission that the rescue deal for Flybe breaches state aid rules and gives the struggling airline an unfair advantage.

It is understood that IAG's complaint claims that the Government is propping up 'feeder flights' that benefit Virgin and Delta.

Departing IAG boss Willie Walsh also blasted the deal, saying it 'makes a mockery' of previous promises made by Flybe about the expansion of regional flights.

Other airline rivals, such as easyJet, have also criticised the state support, while also praising the decision to review APD.

Johan Lundgren, chief executive officer of easyJet, said: "We do not support state funding of carriers but without the detail of what is exactly proposed, it is hard to comment further.

"Having said that, what is clear is that tax-payers should not be used to bail out individual companies especially when they are backed by well-funded businesses."

A Ryanair spokeswoman said: "We have already called for more robust and frequent stress tests on financially weak airlines and tour operators so the taxpayer does not have to bail them out."

The Government has also faced criticism from industry groups over the bailout, given the perceived need for financial support and action in other sectors.

Kate Nicholls, from the UK Hospitality trade body, said: "If APD can be reviewed and waived to support Flybe then business rates should be cut and reviewed to stem the continued high-profile casualties on the high street and in hospitality.

"Hospitality pays a third of its revenue in taxes, slashing its margin to operate.

"Many businesses have been literally taxed out of existence and we want to see the Government taking a similarly supportive approach to deliver on its manifesto."