Britain strikes last-minute deal to keep Flybe flying

An airport worker examines a Flybe aircraft before it takes off from Liverpool John Lennon Airport in Liverpool May 19, 2016. — Reuters pic
An airport worker examines a Flybe aircraft before it takes off from Liverpool John Lennon Airport in Liverpool May 19, 2016. — Reuters pic

LONDON, Jan 15 — The UK government announced a rescue deal yesterday for the troubled no-frills airline Flybe aimed at keeping Europe’s largest regional carrier flying and preserving around 2,000 jobs. 

Neither the government nor the British company disclosed financial details of the agreement.

But both sides signalled that the package would include a review of air passenger duties paid by Flybe and additional investments by company shareholders.

The Treasury will “be reviewing (the) air passenger duty to ensure regional connectivity is strengthened,” it said in a statement. 

“In light of these discussions, Flybe have confirmed they will continue to operate as normal, preserving flights to airports such as Southampton, Belfast and Birmingham.” 

A decision to lower the duties paid by the carrier threatens to anger UK environmental lobbies that want the government to reduce passenger dependence on air travel.

The British government is currently considering a major new commitment in high-speed rail for the country’s under-developed north.

But the Airlines UK trade organisation argued yesterday that the best way to improve regional connectivity was by either cutting or eliminating the flat £26 duty tax altogether.

Flybe’s average fare of just £52 means that half of the company’s revenues are returned to the state.

Larger carriers such as BA can absorb more of the cost, but only offer limited service to smaller cities covered by Flybe.

This model “is not sustainable when so many other costs on airlines are increasing,” Airlines UK chief Tim Alder slade said.

The Treasure statement said its duty review would be conducted within the frameworks of Britain’s legally-binding commitment to reduce carbon emissions to a net level of zero by 2050.

But the main opposition Labour party said the government was making a mistake.

“Slashing airport passenger duty across the board would make a mockery of the government’s supposed commitment to climate emissions,” Labour’s transport spokesman Andy McDonald said.

‘Positive for UK’

The Connect Airways consortium that took over the loss-making carrier a year ago said the rescue package includes pledges of additional investments from Flybe’s main operators.

“The shareholder consortium has committed to keep Flybe flying with additional funding alongside government initiatives,” Connect Airways chief execute Lucien Farrell said.

“This is a positive outcome for the UK,” Flybe CEO Mark Anderson said in a statement released to AFP.

Flybe carries around eight million passengers annually and flies to 170 destinations around Europe from its British hubs. 

Its consortium is led by Virgin Atlantic and includes the investment firm Cyrus and infrastructure specialist Stobart.

Flybe has floundered in the face of fierce competition and consumer demand that has weakened by uncertainties over Britain’s delayed withdrawal from the EU.

Smaller airlines are also more exposed to volatile fuel costs and a struggling pound than their larger rivals.

Flybe was in danger of becoming the second British airline to halt operations in the last four months.

The holiday giant Thomas Cook’s grounding in September forced the British government to launch its largest repatriation of stranded passengers in peacetime history.

British regional airline flybmi also went bankrupt last February. It blamed high costs and Brexit turmoil. — AFP

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