Flybe collapse averted after Government announces review of air passenger duty

Flybe’s collapse has been averted after the Government told the airline it would review air passenger duty.

The Treasury announced on Tuesday evening the loss-making carrier would continue operating after the review of the tax featured in rescue talks.

Flybe’s shareholders also confirmed they would pump in additional funds “alongside Government initiatives” to keep the firm in business.

Environmental groups have warned cutting APD would hamper efforts to combat the climate crisis, while airlines claim that it restricts connectivity and passenger growth.

Flybe, Europe’s largest regional carrier, confirmed it will “continue to operate as normal” following the deal with its shareholders.

The emergency agreement seeks to prevent Flybe becoming the second UK carrier to fail in four months after Thomas Cook went bust in September.

Chancellor Sajid Javid said: “I welcome Flybe’s confirmation that they will continue to operate as normal, safeguarding jobs in UK and ensuring flights continue to serve communities across the whole of the UK.

“The reviews we are announcing today will help level up our economy. They will ensure that regional connections not only continue but flourish in the years to come – so that every nation and region can fulfil its potential.”

Business Secretary Andrea Leadsom said she was “delighted that we have managed to reach an agreement with Flybe shareholders to keep the company in operation”.

Flybe chief executive Mark Anderson welcomed the deal as a “positive outcome for the UK” which “will allow us to focus on delivering for our customers and planning for the future”.

Transport Secretary Grant Shapps said his department will “undertake an urgent review into how we can level up the country by strengthening regional connectivity”.

Flybe’s shareholders Connect Airways, a consortium  including Virgin Atlantic, Stobart Group and Cyrus Capital Partners, will put in more funding as part of the agreement.

Lucien Farrell, chairman of Connect Airways, said: “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.

“As a result, the shareholder consortium has committed to keep Flybe flying with additional funding alongside Government initiatives.”

The Treasury said the APD review ahead of the March Budget would consider the UK’s climate commitments to meet net zero by 2050.

Mr Javid had been holding talks with colleagues to decide whether to let Flybe defer its estimated £106 million APD bill for three years or whether the tax should be cut for all domestic flights, according to multiple reports.

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.

Before the announcement, Greenpeace UK policy director Dr Doug Parr said any cuts to airport passenger duty was a “poorly thought out policy that should be immediately grounded”.

“The Government cannot claim to be a global leader on tackling the climate emergency one day, then making the most carbon-intensive kind of travel cheaper the next,” he added.

“Cutting the cost of domestic flights while allowing train fares to rise is the exact opposite of what we need if we’re to cut climate-wrecking emissions from transport.

“The aviation sector has got away for years with increasing its carbon footprint – the last thing we need is another incentive for them to pollute more.”

The British Airline Pilots’ Association (Balpa) said: “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.

“Balpa looks forward to discussing the airline’s future plans in detail with management, meanwhile passengers can be confident that Flybe remains an excellent choice for regional flying.

“The Government is to be applauded for stepping up to the plate to help one of the few remaining independent UK airlines and a vital one at that.”

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