UK’s Johnson says Flybe important for transport links amid rescue talks

By Sarah Young

LONDON (Reuters) – Stricken regional airline Flybe is important Britain’s transport links and the government will do what it can to help the company, Prime Minister Boris Johnson said on Tuesday, government officials met to decide the airline’s future.

With Flybe’s finances at breaking point, Transport Minister Grant Shapps is holding talks about potentially cutting air passenger taxes on all domestic flights to help it survive.

“It is not for government to step in and save companies that simply run into trouble, but be in no doubt that we see the importance of Flybe in delivering connectivity across the whole United Kingdom,” Johnson told BBC television.

“We’re working very hard to do what we can.”

Flybe’s flights operated as normal on Tuesday, a day after reports emerged suggesting it needed to raise new funds to help it survive through the winter when demand for travel is lower.

Negotiations could lead to a cut to air passenger duty (APD), said the BBC, and a possible deal to allow Flybe to defer a payment of more than 100 million pounds ($130 million) for three years, said Sky .

But talk of tax cuts for flying was met with anger from environmental groups.

Under the rescue deal being discussed, Flybe’s owners, a group which includes Virgin Atlantic and which spent tens of millions to help rescue Flybe last year, would be required to invest tens of millions more of new equity.

Flybe has declined to comment on its finances and the talks about its future.

Any government assistance would need to avoid breaching European Union rules on state aid. A form of short-term funding is one option the government is considering, said the BBC.

A junior transport minister said he could not provide lawmakers with any further details, when responding to an urgent question about the airline in parliament.

CONNECTIVITY PROMISE

Rumours about the possible demise of Flybe have heaped pressure on Johnson’s newly elected government. In December, his Conservative party won seats across regions served by Flybe, helped by a promise to improve transport links outside London.

Flybe’s network of routes include more than half of UK domestic flights outside London. Based in Exeter, south west England, it carries eight million passengers a year between 71 airports in the United Kingdom and Europe.

The aviation industry has long opposed APD, a tax of at least 13 pounds levied on passengers departing from UK airports that raised about 3.7 billion pounds for the government in 2018/19.

Flybe has said its business is disproportionately harmed by the tax as it makes its flights more expensive versus rail and road competitors, because passengers travelling on return flights within the UK will pay it twice.

Greenpeace and other environmental groups, however, reacted angrily to suggestions the government could help encourage flying.

“The government cannot claim to be a global leader on tackling the emergency one day, then making the most carbon-intensive kind of travel cheaper the next,” said Greenpeace chief scientist Doug Parr.

Flybe has 68 aircraft and about 2,000 staff and was bought last year by Connect Airways, a consortium created by Virgin Atlantic, Stobart Group <STOB.L> and investment adviser Cyrus Capital.

Should Flybe collapse, it would be the second high-profile failure in Britain’s travel industry in less than six months after Thomas Cook went into liquidation last September, stranding thousands of passengers.

($1 = 0.7699 pounds)

(Reporting by Sarah Young; editing by Kate Holton and Mark Potter)

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