Ryanair threatens Flybe court action

O’leary demands parity or he’ll sue the Government

RYANAIR will proceed with taking legal action against the Government this week over its decision to give rival Flybe a tax lifeline, unless it extends it to all other airlines.

The Irish budget carrier believes that the Government’s decision to give Flybe more time to pay the tax and duties it owes breaks UK and European Union state aid rules. It adds that unless the Government publishes full details of the deal given to Flybe and gives other carriers the same tax holiday by Thursday, it will launch legal proceedings.

British Airways has already filed a complaint against the Government over the Flybe package with EU competition regulators. Rival easyjet is monitoring the situation and says that it will wait until it sees details of the Flybe deal before making any decisions.

Ryanair made its threat in a letter chief executive Michael O’leary sent to Chancellor Sajid Javid last week. In it he claimed the Flybe “rescue” was “an unnecessary misuse of Government funds to rescue the failed investment of its billionaire shareholders of what has always been a failed business model”.

Flybe is owned by Virgin Atlantic, Stobart Group and Cyrus Capital and it avoided collapse on Tuesday, after its shareholders agreed to invest more money alongside the Government. It was also given extra time to pay the air passenger duty (APD) and other taxes and duties.

On Friday, Flybe rubbished claims that it owed the Government £100 million, insisting that it owed HM Revenue & Customs less than £10 million. It described the deal with HMRC as a “standard time to pay arrangement” that “any business in financial difficulty” may use.

The Government helped save Flybe due to its importance to the UK transport network and the economy. However, O’leary said that if the Government is serious about boosting connectivity between the regions, it should reduce APD, which he claimed had “done absolutely nothing for the environment”.

Ralph Hollister, travel and tourism analyst at Globaldata, said: “A key problem for Flybe is that it does not have an airport hub. Its destinations are made up of an extremely disintegrated network of infrequently flown routes.”

Elsewhere, on Tuesday easyjet chief executive Johan Lundgren is tipped to say trading is slightly ahead of last year when he presents its first quarter update.

Lundgren is also expected to outline the progress of easyjet Holidays, the package beach and tour operator it launched prior to last Christmas, in a bid to take advantage of the demise of Thomas Cook.