Bailed-out Branson branded a hypocrite
Rescued Flybe’s backer said failing airlines must be allowed to go bust
SIR Richard Branson, whose regional airline Flybe was controversially rescued by the Government last week, found himself at the centre of a fresh storm last night after it emerged he once slammed a mooted bailout of his arch rival British Airways.
The billionaire publicly denounced a possible rescue of BA a decade ago, saying: ‘We should wait for its demise.’
He said the idea of an intervention by Ministers was a ‘bad idea’ and that ‘loss-making and inefficient airlines should be allowed to go the wall,’ adding: ‘The Government should not intervene to stop companies going bust.’
The comments have now come back to haunt the Virgin tycoon following the Government’s rescue of Flybe, which is backed by Branson and US airline giant Delta. The intervention has been attacked by some of the biggest names in the industry including Ryanair and British Airways owner IAG, which have criticised Flybe’s owners for not propping up the company that they only bought a year ago.
IAG chief executive Willie Walsh – who was at the helm of BA in 2009 – has sent an official complaint to the European Commission, saying he is concerned that the Government’s Flybe deal may contravene state aid rules.
Ryanair chief executive Michael O’Leary has also stepped into the row, branding the intervention by the Government as a ‘bailout for billionaires’.
Details of the opaque agreement were unclear. Initial reports, which appeared to have been leaked to several outlets, suggested loss-making Flybe could defer paying this year’s estimated air passenger duty (APD) bill of £106million for three years.
Then Flybe emerged on Friday to claim a loan of up to £10million had been agreed only for ‘a matter of months’ and it would seek a separate loan on commercial terms from the Government in the meantime.
IAG has lodged a Freedom of Information request with the Government to prise out more details on taxpayers’ commitments. One industry source said it was ‘incredible’ to see a rescue for Flybe after ‘Monarch and Thomas Cook were allowed to collapse in a pretty spectacular way’. Another branded Branson’s remarks over BA in 2009 ‘hypocrisy’ in light of the events of last week.
Virgin Atlantic said: ‘Leaving personal commentary to one side, we continue to focus our efforts on working with Flybe to transform its business, providing vital regional connectivity to customers across the UK and protecting 2,400 jobs for Flybe staff.
‘Following significant investment of £110 million followed by a further £30million committed, along with Stobart Group and Cyrus Capital Partners, we are in the midst of a major turnaround of Flybe’s business, and with the Government’s support we look forward to bringing the business back to profitability and ensuring that Europe’s largest regional airline continues to fly.’
However some commentators argued the Government had little choice so soon after Boris Johnson’s General Election pledge to help the regions.
Exeter-based Flybe serves more than 20 airports across the UK. It was bought out a year ago by a consortium led by Virgin Atlantic. It would not be the first time one of Branson’s firms had benefited from Government intervention. Taxpayers in 2002 reportedly shelled out up to £500million to bail out West Coast rail, jointly owned by Virgin and Stagecoach.
Then in 2018 Branson was forced to defend a bailout of Virgin Trains East Coast, saying he and partner firm Stagecoach had lost more than £100million on the route because of upgrade delays.
Tax campaigners have written to HM Revenue & Customs to question whether it was right to hand Flybe a payment holiday – which the airline has insisted is a ‘loan’ – on its air passenger duty, which is a charge made on the sale of each ticket.
George Turner, director of Tax Watch, said: ‘A company would normally set aside the amount collected before transferring it to HMRC. In this case it would seem the APD collected by the firm has been spent. It is extremely
difficult to understand how such behaviour could give rise to an acceptable justification for extra time to pay.’
But HMRC said its approach to payment holidays, known as Time To Pay (TTP) deals, was ‘consistent and well established’. In a letter to Tax Watch, a spokeswoman said: ‘While APD collected from passengers should not be used as part of a business cash flow, unfortunately – as with VAT – the reality is that businesses often do.
‘As the purpose of TTP is to enable viable customers to pay what they owe in a way that is financially achievable, it is available for any HMRC liability, including APD.’
But O’Leary said: ‘If you’re going to give Flybe a holiday from the eco tax, why aren’t you extending that to all the other airlines so we can pass it on to our customers?’ Walsh said: ‘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.’
A long-running feud has simmered between Branson and Walsh, with the Virgin chief having once claimed that British Airways had waged a ‘dirty tricks campaign’ against his Virgin Atlantic airline.
It was in 2009, when BA was being buffeted by the global economic crisis, that Branson speculated that a government bailout could be on the cards.
BA’s battered shares tanked 9 per cent the following day, wiping £140million off the its stock price. BA merged with its Spanish rival Iberia in 2011 in a deal pieced together by Walsh.