Air­line saved

Deal secures Flybe fu­ture

The Guardian - - Front Page - Gwyn Topham Trans­port correspond­ent

In­vestors keep car­rier afloat af­ter min­is­ters agree to review air pas­sen­ger duty

The fu­ture of Flybe was se­cured last night af­ter min­is­ters said they had reached a res­cue deal with share­hold­ers to keep Europe’s largest re­gional car­rier fly­ing.

The pack­age of mea­sures in­cludes a po­ten­tial loan of about £100m and/or a pos­si­ble short-term de­fer­ral of a £106m air pas­sen­ger duty (APD) bill, plus a pledge to review do­mes­tic flight taxes be­fore the March bud­get.

Af­ter the spec­tre was raised of another UK air­line fail­ure, Flybe’s owner, Con­nect Air­ways – a con­sor­tium led by Vir­gin At­lantic – were per­suaded to com­mit mil­lions more to cover on­go­ing losses.

The gov­ern­ment is still in ne­go­ti­a­tions to fi­nalise any loan and, al­though Trea­sury sources de­nied re­ports it had agreed to de­fer owed APD, it is un­der­stood HMRC could al­low the air­line a short-term ex­ten­sion to settle its debt.

The deal was con­demned by Bri­tish Air­ways’ owner, IAG, as “a bla­tant mis­use of pub­lic funds”. Chief ex­ec­u­tive Wil­lie Walsh ac­cused Vir­gin of “want­ing the tax­payer to pick up the tab for their mis­man­age­ment of the air­line”.

Any gov­ern­ment loan would also at­tract EU com­mis­sion scru­tiny for breach­ing state aid. How­ever, the EU-ap­proved loans made last Septem­ber by the Ger­man gov­ern­ment to save Con­dor, a sub­sidiary of the Thomas Cook Group, when the UK al­lowed its sis­ter air­line to go bust.

The Trea­sury will also face the wrath of en­vi­ron­men­tal groups for its review of APD, a tax that adds £26 per pas­sen­ger to all Flybe do­mes­tic re­turn flights, to “en­sure re­gional con­nec­tiv­ity is strength­ened while meet­ing the UK’s climate change com­mit­ments to meet net zero by 2050”.

An ad­di­tional review has been promised to look at im­prov­ing re­gional trans­port con­nec­tiv­ity. The Trea­sury said: “In light of these dis­cus­sions Flybe have con­firmed they will con­tinue to op­er­ate as nor­mal, pre­serv­ing flights to air­ports such as Southamp­ton, Belfast and Birm­ing­ham.”

The chan­cel­lor, Sa­jid Javid, said: “I Out­stand­ing bill for air pas­sen­ger duty owed by Flybe that is likely to be de­ferred by HMRC wel­come Flybe’s con­fir­mation that they will con­tinue to op­er­ate as nor­mal, safe­guard­ing jobs in UK and en­sur­ing flights con­tinue to serve com­mu­ni­ties across the whole of the UK.

“The re­views we are an­nounc­ing to­day will help level up our econ­omy. They will en­sure that re­gional con­nec­tions not only con­tinue but flour­ish in the years to come – so that ev­ery na­tion and re­gion can ful­fil its po­ten­tial.”

Lu­cien Far­rell, chair­man of Con­nect Air­ways – owned by Vir­gin At­lantic, Sto­bart group and the pri­vate eq­uity firm Cyrus Cap­i­tal – said: “We are very en­cour­aged with re­cent de­vel­op­ments, es­pe­cially the gov­ern­ment’s recog­ni­tion of the im­por­tance of Flybe to com­mu­ni­ties and busi­nesses across the UK. As a re­sult, the share­holder con­sor­tium has com­mit­ted to keep Flybe fly­ing with ad­di­tional fund­ing along­side gov­ern­ment ini­tia­tives.”

Flybe’s CEO, Mark An­der­son, said: “Flybe is made up of an in­cred­i­ble team of peo­ple, serv­ing mil­lions of loyal cus­tomers who rely on the vi­tal re­gional con­nec­tiv­ity that we pro­vide. This is a pos­i­tive out­come for the UK.”

The trans­port sec­re­tary, Grant Shapps, said his depart­ment would un­der­take “an ur­gent review into how we can level up the coun­try by strength­en­ing re­gional con­nec­tiv­ity”. He said it would look at all op­tions to en­sure air­ports could con­tinue to play a ma­jor role in eco­nomic growth.

The gov­ern­ment had been urged by MPs, unions and busi­nesses to save Flybe, which pro­vides al­most two in five do­mes­tic UK flights and em­ploys more than 2,000 peo­ple. It car­ries 8.5 mil­lion pas­sen­gers a year be­tween 56 air­ports across the UK and main­land Europe, and is the main air­line at re­gional air­ports in­clud­ing Belfast, Southamp­ton and its Ex­eter base.

The deal came af­ter a day when Boris John­son pledged the gov­ern­ment was “work­ing very hard to do what we can” for Flybe and to avert a fur­ther air­line col­lapse soon af­ter the fail­ure of Thomas Cook. The Con­ser­va­tives had com­mit­ted in their man­i­festo to im­prov­ing re­gional con­nec­tiv­ity.

The com­pany’s pleas for help to sur­vive the win­ter came less than a year af­ter it was taken over by a con­sor­tium led by Vir­gin At­lantic, hav­ing posted re­cur­ring losses of about £20m a year.

Flybe has long strug­gled fi­nan­cially, and the fall of ster­ling since the 2016 ref­er­en­dum has piled ad­di­tional pres­sure on UK air­lines, with ma­jor costs, in­clud­ing fuel, in­curred in US dol­lars.

While unions and the Con­fed­er­a­tion of Bri­tish In­dus­try had urged the gov­ern­ment to help Flybe, any po­ten­tial moves to ease APD were con­demned by en­vi­ron­men­tal groups.

Flybe flights were op­er­at­ing as nor­mal yesterday.

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