The UK government is reportedly considering acquiring a stake in Flybe following its decision to introduce measures to help the troubled regional carrier.
According to the BBC, the government is in discussions with Flybe and the European Commission to ensure any rescue deal does not break EU rules on state aid.
Last month, the UK government agreed to review short-haul Air Passenger Duty (Air Passenger Duty (UK only): An excise duty charged on the carriage of passengers flying on an aircraft with an authorised take off weight of more than ten tonnes or more than twenty seats. Due when ...) in an effort to give Flybe more time to pay off its tax debts. Extending any cut in Air Passenger Duty (UK only): An excise duty charged on the carriage of passengers flying on an aircraft with an authorised take off weight of more than ten tonnes or more than twenty seats. Due when ... to the entire airline industry would mean the move would not violate state aid rules, according to officials.
However, the government is reportedly considering extending a loan of up to £100 million, insisting any agreement would be on commercial terms.
One option – and the government’s preferred choice – would see any loan come with a high interest rate that reflects the risk being taken with taxpayers’ money.
The second option is for the government to reserve the right to purchase shares in the loss-making airline at a low price once it has recovered financially.
Prime minister Boris Johnson has a lot riding on the situation; on one hand, rescuing the carrier could help him deliver on campaign promises to improve regional connectivity across the UK.
On the other hand, he risks facing backlash from environmental groups that have been calling on the government to act on its commitment to be carbon neutral by 2050.
Efforts to save Flybe have so far been criticised by other airlines, with Ryanair chief Ryan O’Leary even threatening legal action over the government’s intervention. O’Leary said in a letter to chancellor Sajid Javid that if the “group of billionaires” who acquired the carrier for just £2.8 million “are not willing to put their hand in their own deep pockets” to bail it out then taxpayers shouldn’t be expected to foot the bill.
Meanwhile, British Airways owner International Airlines Group (International Airlines Group - the parent company of British Airways and Spain's Iberia which was created by the merger of the two carriers in 2010) lodged a Freedom of Information request seeking more details about the extent of the rescue deal, with the deadline for a government response approaching this Thursday.