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Fresh doubts over Flybe’s finances

The regional carrier has been unable to secure a £100m Government loan.

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The Government became involved in helping Flybe avoid collapse in January (Steve Parsons/PA)

The Government became involved in helping Flybe avoid collapse in January (Steve Parsons/PA)

The Government became involved in helping Flybe avoid collapse in January (Steve Parsons/PA)

Flybe is facing fresh doubts over its future after failing to secure a £100 million loan.

The struggling airline was saved from collapse earlier this year but has been unable to obtain the finance from the Government.

People briefed on the regional carrier’s situation told the Financial Times that the company only has enough resources to survive “until the end of this month”.

Flybe has been hit by a slump in bookings since the outbreak of the coronavirus.

As part of the January rescue deal, it agreed an arrangement to defer tax payments of “less than £10 million” with HM Revenue and Customs.

Ministers also agreed to hold a review into Air Passenger Duty (APD).

The structure of APD – which adds £26 to the price of most return domestic flights such as those operated by Flybe – could be altered in next week’s Budget.

Flybe serves around 170 destinations and has a major presence at UK airports such as Aberdeen, Belfast City, Manchester and Southampton. It flies the most UK domestic routes between airports outside London.

A series of issues have affected the airline’s finances, including rising fuel costs, falling demand, competition from road, rail and other airlines, plus a weakening of the pound.

It was bought by a consortium comprising Virgin Atlantic, Stobart Group and Cyrus Capital in February 2019, but has continued to make losses.

Rival Ryanair has predicted the drop in demand for flights due to the coronavirus will result in some European airlines failing in the coming weeks.

A Flybe spokesman would not comment on its financial situation.

A Department for Transport spokeswoman said: “We won’t comment on speculation.”

At the time of Flybe’s rescue, rival airlines complained that they should not be penalised for their own success and should also be given a tax holiday.

British Airways owner International Airlines Group claimed the arrangements breached state aid rules.

Garry Graham, deputy general secretary of the Prospect union, said: “Flybe provides important transport connections to and from parts of the UK where other viable options often don’t exist. A number of regional airports are highly reliant on Flybe for most or all of their scheduled services.

“Reports that the Government may fail to provide the loan that is required as part of a package of rescue measures is very worrying. This risks the Government turning its back on these areas of the country and the workers at those airports.

“The Government needs to come forward with concrete proposals on how it will support the services Flybe provides and is a crucial test of its commitment to every region of the UK.”

Brian Strutton, general secretary of the British Airline Pilots Association, said: “The Government made unequivocal promises to keep Flybe flying and loyal staff and passengers rightly expect this Government to keep its word.

“The delay in ratifying the promised deal is unacceptable because Flybe needs to get on with its business plan for 2020 to secure regional connectivity that the Government places so much emphasis on.”

Downing Street would not comment on Flybe’s situation but stressed the Government’s commitment to regional connectivity.

The Prime Minister’s official spokesman said: “We don’t comment on commercially sensitive matters.

“We are firmly committed to promoting and safeguarding regional growth and connections.”

Unite assistant general secretary Diana Holland said: “The Government needs to step in to keep Flybe flying.

“Many of Flybe’s routes are unique, the passengers who use those routes and the communities that Flybe serves must not be abandoned.

“The Government would be wholly negligent to allow Flybe to fall into administration rather than demonstrating it has learned the lessons from Monarch and Thomas Cook and implementing the airline insolvency review

“Unite is seeking an urgent meeting with Department for Transport ministers to discuss Flybe’s future.”

PA