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Flybe defends bailout as Ryanair says regional airline is ‘not viable’

Edmund Heaphy
Finance and news reporter
An airport worker examines a flybe aircraft before it takes off from Liverpool John Lennon Airport in Liverpool northern England, May 19 , 2016. REUTERS/Phil Noble

Flybe on Friday defended its government rescue package, saying that it had negotiated an arrangement that “any business in financial difficulties may use.”

The rebuttal came as Ryanair (RYA.L) CEO Michael O’Leary doubled down on his criticism of the regional airline. O’Leary called the the deal “unfair” on competing operators and said Flybe was “not a viable business.”

“Media reporting of the arrangement Flybe has come to in order to pay its debts to [HM Revenue and Customs] has been inaccurate,” Flybe said in a statement.

The airline was thought to have negotiated an extension on more than £100m in unpaid air passenger duties, but Flybe said on Friday that it has agreed a payment plan for a debt of “less than £10m.”

READ MORE: Ryanair threatens legal action against UK government over Flybe bailout

“This agreement will only last a matter of months before all taxes and duties are paid in full,” Flybe said.

The extension, known as a time-to-pay arrangement, is essentially a debt repayment plan for outstanding taxes.

All companies can attempt to agree a deal with HM Revenue and Customs for extra time to pay unpaid taxes.

But O’Leary told the BBC that it was “unfair on all the other UK airlines” that the government was “stepping in here,” and said that a similar deal should be extended to other operators.

“This is the government misusing state funds to discriminate in favour of Flybe. It is in breach of competition rules and it is in breach of state aid rules, which is why the government is covering up the deal,” he said.

He said that the consortium that owns Flybe, known as Connect Airways, needed to put another £27m into the company.

But he noted that Connect Airways, which is owned by Virgin Atlantic, Stobart Aviation, and Cyrus Capital Partners, had already put £110m into the airline last year.

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

“They have burned their way through that in 12 months, so £27m will be gone by the end of March.”

“And then what? Flybe is not a viable business, it never has been. It has lurched from reconstruction to reconstruction.”

The boss of the low-cost carrier called Flybe a “small” operation and said that other airlines would step in to cover its UK regional flights if it folded.

“If Flybe folds, as it inevitably will – in exactly the same way as we did after Thomas Cook and Monarch – Ryanair, EasyJet, BA, Norwegian and others will step in.”

“We will add more flights, there will be no loss of regional services. The main airlines in the regions are us,” he said.”