There is growing backlash among other airlines against the governments plan to defer some of Flybe’s air passenger duty payments.
Airlines collect the duty from passengers as part of their ticket price, and then hand it over to HMRC. It is understood Flybe could be given up to three months’ breathing space to pay about £100m worth of duty.
British Airways’ owner IAG has filed a complaint to the EU arguing Flybe’s rescue breaches state aid rules while EasyJet and Ryanair have also spoken out, saying taxpayer funds should not be used to save a rival.
Flybe’s APD payments are thought to top £100m.
In June 2017 the Conservative Party and the Democratic Unionist Party agreed to review APD with regard to its possible reduction or abolition for Northern Ireland’s airports.APD on direct long-haul flights from Northern Ireland were cut to be the same rate as short-haul flights as of 1 November 2011, reducing the tax then on economy (coach) fares to the US from £60 to £12 and in premium classes (business and first) from £120 to £24.
EasyJet Chief Executive Johan Lundgren said: “Taxpayers should not be used to bail out individual companies, especially when they are backed by well-funded businesses.”
Ryanair said it had called for “more robust and frequent stress tests on financially weak airlines and tour operators so the taxpayer does not have to bail them out”.
Ahead of filing the state aid complaint, Willie Walsh, the outgoing Chief Executive of IAG, wrote to Transport Secretary Grant Shapps, criticising the government’s involvement in its rescue.
In a letter, Mr Walsh said: “Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes.
“Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline. This is a blatant misuse of public funds.
“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.”
British Airways’ owner IAG’s decision to make a state-aid complaint to the European Commission underlines its determination to shine a light on – and if possible, overturn – the government’s assistance to Flybe.
Ministers have not published the details of the arrangement, but it is understood to include a “time-to-pay” arrangement for the company’s airline passenger duty liabilities.
In his letter, Mr Walsh pointed out that Virgin is part-owned by US carrier Delta Air Lines, which is one of the world’s largest and most profitable airlines.
He argues that Virgin and Delta together have the resources to rescue Flybe, and they should not be asking for taxpayer support. Mr Walsh says Flybe has been mismanaged.
Rob Griggs, Director of Policy at Airlines UK, the industry trade body, defended the deal. He said giving extra time to Flybe to pay APD was not the same as a direct injection of public funds.
The British Airline Pilots Association (Balpa), a union, also welcomed the news.
“This is good news for 2,400 Flybe staff whose jobs are secured and regional communities who would have lost their air connectivity without Flybe,” said Balpa General Secretary Brian Strutton.
Lucien Farrell, the Chairman of Connect Airways – which owns Flybe – said the group had agreed to “keep Flybe flying with additional funding alongside government initiatives”.
“We are very encouraged with recent developments, especially the government’s recognition of the importance of Flybe to communities and businesses across the UK and the desire to strengthen regional connectivity,” he said.