Flybe begs ministers for help with air duty bill
Written by News on 13/01/2020
Flybe is mounting a last-ditch plea to ministers to defer its multimillion pound air passenger duty (APD) bill as it hovers on the brink of collapse.
Sky News can reveal that Europe’s largest regional carrier has asked Whitehall to help it find a way of delaying its APD payments while it runs short of cash during the quieter winter months.
A deferral, which would have to be deemed as avoiding a breach of EU state aid rules in order to gain backing from the government, would ease Flybe’s current cashflow crisis.
Flybe is understood to face an annual APD bill running to tens of millions of pounds.
Sources said that the issue of deferring payments had been under discussion as part of a package of measures between Flybe’s owner, Connect Airways, and the government since the weekend.
The crisis was triggered after two of Connect’s shareholders – Stobart Group, the owner of Southend Airport, and Cyrus Capital Partners, a hedge fund – expressed reservations about a plan to inject £100m into Flybe during the coming years, insiders said.
Unless the government agrees to the request to defer Flybe’s APD bill, the airline could collapse into administration as early as Tuesday.
Sky News revealed at the weekend that EY, the accountancy firm, has been put on standby to handle an insolvency.
The fact that discussions were continuing between Flybe’s parent and the government suggests there remains some hope that a solution can be found.
One source suggested that all three of Connect’s shareholders would contribute the planned funding to Flybe’s turnaround plan if ministers agree to support the company’s request for help.
More than 2000 jobs, as well as numerous links between regional UK airports, appear to hinge on an agreement being reached.
Sources said that Flybe’s losses had escalated in the ten months since it was delisted from the London stock market and acquired by a consortium comprising Sir Richard Branson’s Virgin Atlantic, Stobart and Cyrus.
Credit card companies’ decision to retain more of the money paid by passengers for Flybe flights has exacerbated a cashflow squeeze at the Exeter-based company, they added.
Flybe’s former chief executive, Christine Ourmieres-Widener, complained about the impact of APD on the airline shortly before she left last year.
“We think APD is definitely not supporting the growth of regional connectivity,” she said.
“Without APD we could grow more in the UK.”
The trade body for airlines has dubbed APD as “nothing but a tax on Global Britain”.
If Flybe is unable to stitch together a rescue deal, it would be the second major airline collapse in four months, following Thomas Cook Group’s implosion last September.
Monarch, another big carrier, collapsed two years earlier.
A decision to support Flybe, albeit indirectly, might prompt awkward questions to ministers about why the government was not prepared to help up companies with larger workforces and passenger numbers.
Flybe operates about 75 aircraft and serves more than 80 airports across the UK and Europe.
In Britain, it has a significant presence at 25 airports including Belfast, Birmingham, Manchester and Southampton.
The consortium which took control of Flybe’s assets last year pledged to pump £100m into Flybe’s turnaround plan, with the airline due to be rebranded as Virgin Connect this year.
The regional airline had come close to outright collapse a year ago amid an acrimonious takeover battle that left shareholders fuming that their equity had been left almost worthless.
That came just months after Flybe’s board had rejected a 40p-a-share takeover bid.
The airline said: “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.”
A government spokesperson said: “We do not comment on speculation or the financial affairs of private companies.”
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