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  1. ITV Report

Ministers agree deal with shareholders to rescue struggling airline Flybe

  • Video report by ITV News Political Correspondent Daniel Hewitt

The government has agreed a deal to rescue struggling Flybe after negotiations with a consortium of firms that own the airline.

Business Secretary Andrea Leadsom said she was "delighted" by the agreement, which will "keep the company operating, ensuring that UK regions remain connected".

"This will be welcome news for Flybe's staff, customers and creditors and we will continue the hard work to ensure a sustainable future," she added.

The agreement means the 2,400 people employed by Flybe will likely keep their jobs.

The British Airline Pilots' Association (Balpa) praised the deal and said the government should "applauded for stepping up to the plate" to save one of the last remaining independent UK airlines.

Transport Secretary Grant Shapps also welcomed the agreement and said no taxpayer money had been made available.

He said: "Delighted we've been able to work closely with Flybe to ensure Europe's largest regional airline is able to continue connecting communities across Britain."

Chancellor Sajid Javid had held talks with the business and transport secretaries to discuss if the loss-making regional carrier can defer paying this year's estimated air passenger duty (APD) bill of £106 million for three years or whether the tax should be cut for all domestic flights, according to multiple reports.

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Airlines claim APD 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.

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."

  • ITV News Business Editor Joel Hills says it's not clear "throwing money at Flybe will actually turn the airline around"

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

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 Transport Secretary Grant Shapps (L), Chancellor Sajid Javid (C) and Business Secretary Andrea Leadsom reportedly struck a deal with Flybe's owners. 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.

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

The deal means Flybe has avoided being the second UK airline to fail in four months, after Thomas Cook went bust in September.