O’Leary attacks “badly thought-out bailout” and states intention to launch proceedings for contravention of UK and EU competition laws
Ryanair CEO Michael O’Leary has threatened legal action over a government rescue deal for regional carrier Flybe.
O’Leary said the rescue bid contravened competition rules in a strongly-worded letter to Chancellor, Sajid Javid. He argued that any measures put in place to ensure the continued operation of Flybe should be extended to other airlines.
The airline boss said he would launch legal proceedings against the government if the playing field for other airlines was not levelled. British Airways’ owner IAG has also filed a complaint with the EU, arguing the rescue breaches state aid rules.
Earlier this week, cabinet ministers agreed a rescue deal for Flybe, thought to centre on giving the airline extra time to pay around £100m of outstanding Air Passenger Duty (APD). Although details have not been made public, the government has stated that the deal complies with state aid rules. Flybe has dismissed reports of the £100m tax payment holiday figure, instead stating that it had agreed a payment plan with HMRC for “less than £10m”. It added that the arrangement would stand for a “matter of months” before being paid off.
Badly thought-out bailout of a chronically loss-making airline
Mr O’Leary described the move as “badly thought-out bailout of a chronically loss-making airline” and called for any tax deferment granted to Flybe to be extended to its rival operators.
“Unlike Flybe we all operate profitable business models (without the benefit of being owned by billionaires). We must be treated the same as Flybe if fair competition is to exist,” he said.
Flybe is owned by a consortium which includes Virgin Atlantic, Stobart Group and Cyrus Capital who have agreed to invest £30m into the airline. Stobart Group has said it will provide £9m of capital “with the funds drawn down only if required”.
Ryanair to launch proceedings for breach of competition laws
But HMRC has indicated that what it describes as a “tax holiday” is also available to other businesses experiencing difficulties, with more than 700,000 Time to Pay agreements used last year.
O’Leary’s letter called on the government to clarify the support which had been given to the regional airline, including details of Flybe’s APD deferment.
He warned: “Should you fail to confirm these facts within the next seven-day period, please be advised that Ryanair intends to launch proceedings against your government for breach of UK and EU competition law and breach state aid rules.”
IAG has also attacked the government over its “lack of transparency” over the Flybe deal. It has submitted a Freedom of Information request over the details of the rescue deal.
The government has said it will review APD as part of a government commitment to improving regional connectivity across the UK, with an announcement made in March’s budget.