Airlines’ anger at ‘bailout package’ for Flybe

THE GOVERNMENT is under mounting pressure to explain the deal it struck with struggling airline Flybe – as rivals demanded answers and threatened court action.

Ryanair boss Michael O’Leary threatened action against the Government if it did not offer a “tax holiday” to all airlines after it was widely reported Flybe – which flies from Leeds-Bradford – had been allowed by HM Revenue and Customs to defer its monthly air passenger duty payments.

In a letter to Chancellor Sajid Javid, Mr O’Leary accused the Government of distorting fair competition between airlines and accused it of giving a subsidy to Flybe’s billionaire owners.

Meanwhile, British Airways and Aer Lingus owner International Airlines Group (IAG) has written to the Treasury, Transport and Business departments asking a series of questions over the deal.

Bosses want to know if the Government is a “financial guarantor” to Flybe, has a tax deferral been agreed and what reassurances have been made by the owners. The questions, sent in a Freedom of Information request, IAG say, are being asked “due to a lack of transparency about the Government’s involvement in the rescue package for Flybe”.

On the air-duty issue, the company asks: “Has it (the Government) agreed to alter the timing or amount of air passenger duty due to be paid by Flybe and, if so, the terms of that agreement and the reason behind it.”

It also calls for “details of any Government funding or loans to Flybe, the basis on which those agreements were reached plus whether it has contemplated future loans”.

Ministers are asked if they have

ensured Flybe’s owners – Stobart, Virgin Atlantic and Cyrus Capital – have met their previous funding commitments to invest £100m in the airline when they bought it last year.

IAG asked: “Is the Government satisfied that the terms and agreements for connecting passengers between Flybe and its shareholders’ airlines are on normal commercial grounds that protect the interests of Flybe?”

Meanwhile Ryanair boss Mr O’Leary said he believed the rescue “clearly constitutes illegal state aid”.

“We are deeply concerned and shocked by reports of your Government’s bailout of Flybe this week, which distorts fair competition between airlines,” he said.

The Government has confirmed it will review air duty but has declined to confirm or deny that a deferral has been agreed. HMRC also said tax affairs were “confidential”.