Government working 'very hard' to save Flybe, says PM as ministers 'prepare to discuss rescue package'

The government is "working very hard" on Flybe's rescue, the prime minister has said ahead of reported ministerial meetings which will evaluate what can be done to save the struggling airline.

Boris Johnson declared it was not for government "to step in and save companies that simply run into trouble" but admitted the company has an integral role in "delivering connectivity across the whole United Kingdom".

It is reported Chancellor Sajid Javid, Business Secretary Andrea Leadsom and Transport Secretary Grant Shapps will meet to discuss whether a £100 million tax payment can be deferred until 2023, according to Sky News.

It was reported that the deal would be conditional on Flybe’s three shareholders pumping tens of millions of pounds into the loss-making carrier.

"We're working very hard to do what we can, but obviously people will understand that there are limits, commercially, to what a government can do to rescue any particular firm," Mr Johnson told the BBC.

"But what we will do is ensure that we have the regional connectivity that this country needs."

The number of passengers Flybe has carried since 1985. Credit: PA Graphics

The plan is said to involve Flybe deferring this year’s estimated air passenger duty (APD) bill of £106 million for three years, giving it the chance to survive the tough winter trading conditions.

But shadow chancellor John McDonnell poured scorn on the plan, saying it is "not the way forward" to bail out a company through tax cuts across the industry.

Trade association Airlines UK, which represents UK carriers, has previously warned that the tax restricts connectivity and passenger growth.

Passengers on domestic flights pay £26 in APD for a return trip, with higher rates for longer flights and premium cabins.

The tax is expected to be worth £3.7 billion to the Treasury in 2019/20.

Airlines UK spokesman Rob Griggs explains how APD affects airlines like FlyBe.

Rob Griggs of Airlines UK told ITV News: "APD has the impact of dampening demand and it makes certain routes - which would otherwise be viable - more difficult to maintain.

"And for a regional carrier like FlyBe, they have to pay that tax twice, on the outbound and return leg, so it makes the problem even harder in routes they maintain, which are often, for regional carriers in the UK, really important - connecting different parts of the UK.

"It makes those routes hard to maintain and to be financially viable."

But Greenpeace Chief Scientist, Dr Doug Parr, slammed the prospect of cutting tax for airlines "shockingly bad".

He said: "We're living in a climate emergency - as Parliament has declared - and aviation is an undertaxed, carbon intensive form of travel.

"There may be certain groups or certain places where they operate an essential service. But we're talking about a tax cut right across the board for the aviation industry - it's a completely shockingly bad way to go about this."

Flybe was bought by a consortium consisting of Virgin Atlantic, Stobart Group and Cyrus Capital in February 2019 following poor financial results.The consortium, known as Connect Airways, paid just £2.2 million for Flybe’s assets but pledged to inject cash into the airline to turn it around.

The holding of rescue talks with the Government over the weekend indicates the financing requirements have become greater than expected.

If Flybe collapses, it would be the second UK airline to fail in four months, after Thomas Cook went bust in September.

Around 2,400 people are employed by Flybe.

The Transport Secretary Grant Shapps (L), Chancellor Sajid Javid (C) and Business Secretary Andrea Leadsom are expected to meet to discuss Flybe's rescue. Credit: PA

The airline is Europe’s largest regional carrier, flying around nine million passengers a year to 170 destinations across the continent.

It has a major presence at UK airports such as Aberdeen, Belfast City, Manchester and Southampton.

Aviation consultant John Strickland told the PA news agency that some of these airports would suffer a “significant impact” if Flybe ceased operations.

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

Flybe operates most domestic routes between airports outside London, including connections between England, Scotland and Northern Ireland.

Flights operated as normal on Monday.

A Flybe spokeswoman said: “Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned.

“We don’t comment on rumour or speculation.”

Brian Strutton, general secretary of pilots’ union Balpa, said Flybe plays “an incredibly important role connecting the regions and nations of the UK and onwards to Europe”.

He went on: “The Government must recognise that the UK cannot afford to lose yet another airline, and the markets that Flybe serves cannot afford to lose their air connections which help businesses thrive.

“So we urge the Government to take every possible action to keep Flybe flying.”

The airline began as Jersey European Airways in 1979, operating regional flights from Jersey.

Its route network grew and it was rebranded British European in 2000, before becoming Flybe in 2002.