UK Markets open in 5 hrs 29 mins

BA-owner IAG files complaint with EU over Flybe rescue package

Edmund Heaphy
Finance and news reporter
A Flybe plane takes off from Manchester Airport. Photo: Reuters/Phil Noble

British Airways-owner IAG (IAG.L) on Wednesday said that it had filed a complaint with the European Union’s executive arm about the government rescue package for regional airline Flybe.

IAG believes that the bailout, which could see the government offer Flybe an extension on unpaid air passenger duties worth £100m, constitutes illegal state aid.

The European Commission may agree with IAG’s assessment if it finds that the deal would involve the UK government unfairly providing assistance that is not available to other airlines, something that could in turn harm competition.

The commission, however, approved loans made by the German government in September 2019 to save Condor, a Thomas Cook subsidiary.

Earlier, Willie Walsh, the CEO of IAG, blasted the government’s decision to rescue regional airline Flybe, calling the move a “blatant misuse of public funds.”

Ministers on Tuesday evening announced a bailout that could end up being worth more than £100m ($130m) for Flybe, saving more than 2,000 jobs.

The government is still in negotiations regarding the extension on unpaid air passenger duties.

But business secretary Andrea Leadsom said that the government had reached an agreement with shareholders to keep the company operating.

The commission said on Wednesday that it was willing to discuss the rescue package with the UK government, noting that the the deal should attempt to avoid distorting competition.

“In general ... any state aid intervention needs to be designed so that competition is not distorted and a level playing field is maintained,” said Arianna Podesta, a spokesperson for the commission.

Walsh said on Wednesday morning that the consortium that owns Flybe wanted taxpayers “to pick up the tab for their mismanagement of the airline,” branding it “a blatant misuse of public funds.”

In February 2019, the consortium, Connect Airways, completed the purchase of the assets and operations of Flybe for £2.8m.

The consortium is owned by Virgin Atlantic, Stobart Aviation, and Cyrus Capital Partners. Virgin Atlantic is 49% owned by US airline Delta.

Walsh pointed out that prior to the acquisition by Connect Airways, Flybe had argued that taxpayers should subsidise regional routes.