The government has agreed to allow airline Flybe to defer payment of some taxes in order to “ensure regional connectivity is strengthened”.
Although the full terms of the rescue deal have not been disclosed, the company has been granted three months’ grace on more than £100m of air passenger duty. Airlines collect air passenger duty as part of the ticket price and pass it on to HMRC.
Three cabinet ministers – transport secretary Grant Shapps, business secretary Andrea Leadsom and chancellor Sajid Javid – signed off on the deal, which has drawn anger from other sections of the aviation industry.
The ministers added they would be reviewing air passenger duty ahead of the budget in March.
Willie Walsh, chief executive of IAG, the owner of British Airways, Iberia and Aer Lingus, said the deal was a “misuse of public funds”.
Flybe was rescued in a £2.2m deal January last year, when it was acquired by a consortium involving Virgin Atlantic and Stobart Group. Virgin is part owned by Delta Air Lines of the United States, which is one of the world’s largest and most profitable airlines.
“Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for taxpayers to fund its operations by subsidising regional routes,” Walsh said. “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.”
Flybe is already in receipt of some public money for its important Newquay-Heathrow route, which it operates under a "public service obligation" contract with the government.
Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that U.K. regions remain connected. This will be welcome news for Flybe’s staff, customers and creditors and we will continue the hard work to ensure a sustainable future.— Andrea Leadsom MP (@andrealeadsom) January 14, 2020
Following the deal with the government, Flybe has confirmed it will continue to operate as normal, preserving flights to airports such as Southampton, Belfast and Birmingham.
Based in Exeter, Flybe carries around eight million passengers a year from airports such as Southampton, Cardiff and Aberdeen, to the UK and Europe.
Sajid Javid, said: “I 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.”
Mark Anderson, chief executive of Flybe 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 and will allow us to focus on delivering for our customers and planning for the future.”