The UK government is reported to have offered to allow Flybe to defer Air Passenger Duty payments on UK domestic flights in an attempt to keep the carrier from going into administration.
The news was described as a “misuse of public funds” by Willie Walsh, outgoing CEO of IAG, in a letter to the government.
Flybe was thought to owe around £106m, with the package of measures reported to include either a loan for that figure or a deferral of payment. In return the airline’s shareholders were expected to inject millions of pounds into the group. The government was also thought to have promised to review tax on domestic flights before the next Budget.
The company said: “We are delighted with the support received from the government and the positive outcome for our people, our customers and the UK. Flybe remains committed to providing exceptional air connectivity for the UK regions with the full support of its shareholders.”
This year was due to see Flybe become Virgin Connect, with a rebrand of what was Europe’s largest regional airline after last year’s sale to Connect Airways, owned by Virgin Atlantic and its partners Stobart Group and Cyrus Capital. The consortium paid £2.8m for Flybe’s operations and another £2.2m for the parent company, promising a further £100m for the airline’s turnaround plan.
Business secretary Andrea Leadsom said: “Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that UK 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.”
APD is currently charged at £13 per flight.
Walsh wrote: "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.
“Flybe's precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built.”
IAG has filed a complaint with the European Commission over the government bailout
Johan Lundgren, CEO, easyJet, added: “Taxpayers should not be used to bail out individual companies, especially when they are backed by well-funded businesses.”