The government has agreed a rescue deal to save ailing regional airline Flybe - but ministers insisted the bail-out does not include an injection of taxpayers’ cash
In a significant intervention by Boris Johnson’s new Conservative administration, ministers told the airline they would review air passenger duty (APD) while its shareholders would pump in additional investment in order to save the business.
The review of the tax, which is estimated to be £106 million this year, was seen as crucial to keeping the firm afloat.
Environmental groups have warned cutting APD would hamper efforts to combat the climate crisis while airlines claim that it restricts connectivity and passenger growth.
Flybe’s shareholders agreed to a cash investment – understood to be in the region on tens of millions of pounds – to keep Europe’s largest regional carrier in business “alongside government initiatives”.
The airline would not comment when asked if the Treasury had separately agreed to the deferral of a portion of the airline’s outstanding tax bill over a period of months.
Transport secretary Grant Shapps said APD worked “slightly oddly”, adding “it costs twice as much to fly within the country as it does to fly to for example France and back”.
Passengers on domestic flights pay £26 in APD for a return trip, with higher rates for longer flights and premium cabins.
The tax is expected to be worth £3.7 billion to the Treasury in 2019/20.
Shapps added the taxpayer had not paid any money into the firm. Ministers have also said they will review “regional connectivity”.
The emergency agreement seeks to prevent Flybe, which employs 2,400 staff, becoming the second UK carrier to fail in four months after Thomas Cook went bust in September.
Business secretary Andrea Leadsom said she was “delighted that we have managed to reach an agreement with Flybe shareholders to keep the company in operation”.
Flybe chief executive Mark Anderson welcomed the deal as a “positive outcome for the UK” which “will allow us to focus on delivering for our customers and planning for the future”.
Flybe’s shareholders Connect Airways, a consortium including Virgin Atlantic, Stobart Group and Cyrus Capital Partners, will put in more funding as part of the agreement.
Connect Airways chairman Lucien Farrell 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, and the desire to strengthen regional connectivity.
“As a result, the shareholder consortium has committed to keep Flybe flying with additional funding alongside government initiatives.”