THE UK’S largest regional airline, Flybe, has been saved from administration following government intervention. It was initially expected that last year’s £2.2m Connect Airways deal would guarantee the carrier’s future, however, the consortium, which comprises Virgin Atlantic, Stobart Group and Cyrus Capital Partners, has failed to ease the company’s financial burdens.
In an unprecedented step, the UK government has stepped in to save the firm with a rescue package understood to include a £100m loan and/or a deferral of Air Passenger Duty (APD) debts, currently in the region of £106m. APD has previously caused issues for the Exeter-based carrier, which pays around £26 on a return domestic fare. In 2014, Flybe cited the levy as one of the main reasons for pulling out of London/Gatwick Airport.
The bailout has seen major criticism from other players within both the aviation and rail industries, in addition to backlash from climate campaigners. However, unlike both Monarch Airlines and Thomas Cook Airlines which received no government help prior to entering administration, Flybe is vital for more isolated communities. This is exemplified by the likes of Cornwall Airport Newquay which has its London/Heathrow route subsidised, as well as key destinations like Belfast/City and the Isle of Man which are heavily reliant on Flybe links for tourism and connections to the UK mainland. Additionally, other airports are at major risk of economic implications if the carrier folds, with Southampton estimated to lose at least 95% of its scheduled services should Europe’s biggest regional carrier collapse.
International Consolidated Airlines Group CEO, Willie Walsh, has scalded the government’s action, stating: "Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for taxpayers to fund its operations by subsidising regional routes. Flybe's precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built."
