Chancellor Sajid Javid will hold talks with the business and transport secretaries about whether to support a rescue deal for airline Flybe, it has been reported.
Andrea Leadsom and Grant Shapps will meet Mr Javid on Tuesday 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.
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.
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.
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 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.