Cabinet ministers agree rescue deal but agreement is dubbed a “misuse of public funds” by IAG chief

Cabinet ministers have reached a tax break agreement to keep regional airline Flybe operating.

The rescue plan is thought to contain a deferment for some of Flybe’s Air Passenger Duty payments, estimated to be in the region of £100m. The deal was signed off by Transport Minister Grant Shapps, Business Secretary Andrea Leadsom and Chancellor Sajid Javid.

The airline’s shareholders have also pledged further investment as a result of the agreement. Flybe has urged the government to consider an across-the-board cut in Air Passenger Duty which will be reviewed before the next budget. Trade association Airlines UK, had also previously warned that the tax would restrict connectivity and passenger growth.

Bailout criticised by British Airways chief

But the bailout has been criticised by rival airlines. According to the BBC, chief executive of British Airways’ owner, IAG, Willie Walsh, has attacked the government’s plan in a letter to Transport Secretary Grant Shapps.

Walsh said: “Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes.

“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.”

Government proposals to cut APD have also been attacked by Green Party MP Caroline Lucas. Passengers on domestic flights pay £26 in APD for a return trip. Higher rates are applied to longer flights and premium cabins. APD is expected to bring in £3.7 billion to the Treasury in 2019/20.

Airline assets sold for £2.2 million

Flybe was bought by a consortium known as Connect Airways in February 2019 consisting of Virgin Atlantic, Stobart Group and Cyrus Capital. The sale followed poor financial results with the consortium paying just £2.2 million for Flybe’s assets, but pledging to inject cash into the beleaguered airline in a bid to turn around its fortunes.

Flybe is Europe’s largest regional carrier, flying around nine million passengers a year to 170 destinations across the continent. It operates around 75 aircraft and serves more than 80 airports across the UK and Europe. The airline employs around 2,400 people.

Major presence at UK regional airports

The airline is a major presence at the UK’s regional airports such as Aberdeen, Belfast City, Manchester and Southampton. It operates most domestic routes between airports outside London, including connections between England, Scotland and Northern Ireland.
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