January 14, 2020 / 7:08 AM / 3 days ago

Britain reaches deal to rescue regional airline Flybe

LONDON (Reuters) - Regional airline Flybe was rescued on Tuesday after the British government promised to review taxation of the industry and shareholders pledged more money to prevent its collapse.

The agreement comes a day after the emergence of reports suggesting it needed to raise new funds to survive through its quieter winter months.

After crunch talks with shareholders, Britain’s finance ministry said that it would review both air passenger duty (APD) and Britain’s regional connectivity as part of the plan.

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

“The reviews we are announcing today ... will ensure that regional connections not only continue but flourish in the years to come.”

Flights operated as normal on Tuesday.

Prime Minister Boris Johnson had said earlier that Flybe was important for Britain’s transport links and that the government would do what it could to help the carrier.

Flybe said it was delighted with how the discussions had gone.

“This is a positive outcome for the UK and will allow us to focus on delivering for our customers and planning for the future,” Chief Executive Mark Anderson said.

Under the agreement, the Flybe shareholders agreed to put in tens of millions of pounds to keep the airline running.

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

Lucien Farrell, Chairman of Connect Airways, said that it was “very encouraged” by the government’s planned reviews and desire to strengthen regional connectivity.

FILE PHOTO: A Flybe plane takes off from Manchester Airport in Manchester, Britain January 13 2020. REUTERS/Phil Noble

“As a result, the shareholder consortium has committed to keep Flybe flying with additional funding alongside government initiatives,” he said in a statement.

Last September travel company Thomas Cook entered liquidation after it failed to agree a rescue plan in last-ditch talks with its lenders and the government.

DISPROPORTIONATE HARM

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

Flybe has said that its business is disproportionately harmed by the tax. The airline says the tax makes its flights more expensive than rail and road alternatives because passengers traveling on return flights within the UK will pay it twice.

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

“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,” said Greenpeace chief scientist Doug Parr.

Britain's Prime Minister Boris Johnson speaks in the Stormont Parliament Buildings in Belfast, Northern Ireland, January 13, 2020. Liam McBurney/Pool via REUTERS

The government said it remains committed to net zero emissions by 2050 as it reviewed the tax ahead of a budget scheduled for March 11.

Rumors about the possible demise of Flybe had 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 includes more than half of UK domestic flights outside London. Based in Exeter in the south west of England, it carries eight million passengers a year between 71 airports in the United Kingdom and Europe.

Reporting by Sarah Young and Alistair Smout; Editing by Kate Holton, Mark Potter and David Goodman

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