Government Flybe deal causes anger
BRITISH Airways owner International Airlines Group (IAG) has filed a complaint with the European Union over the UK Government’s decision to rescue Flybe.
The PA news agency understands 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 comes hours after IAG chief Willie Walsh publicly criticised the move, describing it as a “blatant misuse of public cash”.
The Treasury announced on Tuesday evening that the loss-making 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 Richard Branson’s Virgin, Stobart Aviation and Cyrus Capitals, which purchased the airline at the start of last year. It is understood that IAG’s complaint claims that the Government is propping up “feeder flights” that benefit Virgin and Delta.
Transport Secretary Grant Shapps highlighted that supporting “regional connectivity” was a key reason for the Government’s agreement with Flybe shareholders.
Departing IAG boss Mr 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.”
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.”
Meanwhile, Labour’s shadow transport secretary Andy McDonald said: “This is another taxpayer bailout for Richard Branson from the Tories. The Government needs to come clean on the restructuring plan, which must include the trade unions, agreed as part of the deal.”