Exeter-based airline Flybe has agreed a deal with the UK government to rescue the company from the brink of collapse.
The regional airline revealed it has been granted a payment plan by HMRC for “less than £10m” in a bid to prevent the company from entering administration.
Established in 1979, Flybe is the UK’s largest regional airline. It carries approximately 8 million passengers per year and employs over 2,400 staff – many of whom work in the Exeter-based Head Office and Exeter International Airport, one of the airline’s largest hubs. Flybe operates 78% of departing flights from Exeter Airport and its collapse could have a damaging impact with other Flybe-dominant airports Southampton and Belfast likely to suffer too.
Flybe has been deemed vital for regional connectivity … However, the rescue deal has not been welcomed by all.
Flybe has attributed its past financial difficulties to falling demand, increasing fuel costs and a weaker pound due to Brexit. However, the predominant cause of its failure is thought to be Air Passenger Duty (APD), a tax paid on both departing and arriving flights within the UK. As a regional airline with a large proportion of internal flights, APD has long put Flybe at a financial disadvantage to rival budget airlines. The HMRC Time To Pay deal sets out a repayment plan for the airline’s estimated £106m tax debt, in addition to securing a £30m investment from owners Connect Airways.
Flybe has been deemed vital for regional connectivity by Boris Johnson and described as a “UK strategic asset” by Exeter MP Ben Bradshaw. However, the rescue deal has not been welcomed by all. The chief executive of IAG, owner of British Airways, has filed a complaint with the EU, branding it “unlawful state aid”. Ryanair’s chief executive has threatened legal action against the government if it does not allow all airlines the same APD concessions as it granted Flybe. Further concerns have been raised over the UK’s environmental pledges as ADP was introduced to limit internal flying to reduce national emissions. It has also been questioned why there was no such intervention for other failing airlines such as Thomas Cook, which received no government aid and was consequently forced to file for bankruptcy last year.
Editor: Pete Syme