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UK government could help save Flybe with 'rescue package'

Tom Belger
Finance and policy reporter
Flybe is struggling. Photo: PA

UK government ministers are understood to be planning urgent talks over a potential rescue package for the airline Flybe.

The leading regional airline, which has more than 2,400 staff, is widely reported to be on the brink of administration after a difficult winter. It said on Twitter it does not “comment on rumour or speculation.”

Chancellor Sajid Javid will meet business secretary Andrea Leadsom and transport secretary Grant Shapps for emergency talks to thrash out a government response, according to Sky News.

The airline operates a significant proportion of all UK domestic flights, and its routes are seen as strategically important for connectivity across Britain.

Deferring loss-making Flybe’s air passenger duty bill, estimated at £106m, for three years is said to be one option under discussion. It could be made conditional on Flybe’s shareholders injecting extra cash.

READ MORE: Half UK business chiefs predict recession in 2020

The government could slash air passenger duty on all domestic flights rather than just Flybe’s, in a bid to comply within EU state aid rules.

Meanwhile accountancy firm EY has been put on standby to handle the potential administration of the group, Sky News said, citing unnamed aviation industry sources.

But prime minister Boris Johnson said in a BBC interview on Tuesday morning: "It is not for the government to step in and save companies that simply run into trouble.

"But be in do doubt, we see the importance of FlyBe delivering connectivity across the whole United Kingdom."

Prime minister Boris Johnson. Photo: Dinendra Haria / SOPA Images/Sipa USA

Pressed on whether the government would help, he said it was “working very hard” to do what it could but said he could not go into “commercially confidential” discussions.

Returning to his pitch from the election, he added: "We don't have good enough infrastructure in many parts of the country and people don't feel they have the opportunity to get to the high-skilled, high-paid jobs. We want to ensure regional connectivity... it is part of the agenda."

Flybe said in a statement on Twitter on Sunday: “Flybe continues to provide great service and connectivity for our customers while ensuring they can continue to travel as planned. We don’t comment on rumour or speculation.”

John Strickland, an industry analyst, told PA that if Flybe collapsed it could have a “significant impact” on the viability of some UK airports outside London.

“At a market level it doesn’t look like very much. But if you look at the regions, it’s dramatic,” he said.

READ MORE: Pilots’ fears over reports Flybe is on the brink

Nadine Houghton, national officer at the GMB union, warned 1,400 jobs in its supply chain could also be at risk as she called for the government to step in.

She said: “Our economy is tanking. The last thing we need is an airline to go under — especially one which provides a vital public service in some parts of the country.”

But Friends of the Earth campaigner Jenny Bates said it would be “completely unacceptable and even reckless” to slash duties, with a fall in short domestic trips needed to cut UK flight emissions.

Flybe has been struggling for some time and was bought by a consortium called Connect Airways, which includes Virgin Atlantic, Stobart Group and Cyrus Capital, in February last year.

If Flybe fails to secure new cash, it could prompt the second collapse of a major airline in the UK in less than six months.

Thomas Cook, the world’s oldest travel operator, collapsed into administration in September, leaving 150,000 holidaymakers stranded and putting 9,000 jobs in the UK at risk.