BA boss slams Flybe bailout and files official complaint against government

Economy Whitehall

The boss of British Airways has slammed the UK government’s rescue deal for the regional airline FlyBe with an official complaint filed to the European Commission against the plan.

Ministers announced a rescue package for the country’s biggest domestic airline carrier on Tuesday night that includes a £100 million tax deferral to keep Flybe flying.

Willie Walsh, the chief of executive of IAG – the owner of British Airways and other airlines – called the deal “a blatant misuse of public funds” that breaches state aid rules.

IAG have filed an official complaint with the EC and have been supported by other airlines.

‘Taxpayers should not bail out individual companies’

Ryanair said it had already called for “more robust and frequent stress tests on financially weak airlines and tour operators so the taxpayer does not have to bail them out”.

Johan Lundgren, the chief executive of EasyJet is quoted in the Financial Times, saying: “Taxpayers should not be used to bail out individual companies, especially when they are backed by well-funded businesses.”

FlyBe is partly owned by Virgin Atlantic who in turn is part owned by Delta Airlines – one of the world’s largest and most profitable airlines.

Details of the government bailout have not been published by Whitehall but the BBC reports it includes a “’time-to-pay’ arrangement for the company’s airline passenger duty liabilities”, with the tax-break estimated to top £100 million and the airline given a three-month hiatus to pay it. Ministers will also review the air passenger duties for domestic flights. Previous planned changes to the tax are already scheduled for April 2020.

‘Virgin/Delta want taxpayer to pick up the tab’

In a letter to the transport secretary Grant Shapps, the IAG chief executive Willie Walsh said: “Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes.

“Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline. This is a blatant misuse of public funds. Flybe’s precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built.”

Shapps, along with chancellor Sajid Javid and business secretary Angela Leadsom signed off on the deal to keep the FlyBe flying, with Shapps saying it was a necessary move to protect key routes.

“The actions we have taken will support and enhance regional connectivity across the UK, so local communities have the domestic transport connections they rely on,” said Shapps, adding: “any changes implemented…will apply to all airlines in the competitive aviation market.”

Government decision ‘beggars belief’

Ministers’ decision to review air passenger duties for domestic flights has got short shrift from the rail industry and climate action groups.

John Stewart, a member of the Heathrow campaign group HACAN, said: “The government has just committed itself to being the greenest in the world. It beggars belief that it now wants to reduce the cost of the most carbon-intensive form of transport.”

Domestic flights account for 4% of UK aviation’s overall emissions, the aviation minister Paul Maynard told MPs on Tuesday with the statistic seen as persuasive enough for ministers to cut the tax charged on domestic flights.

The shadow transport secretary Andy McDonald said of the Flybe deal: “This is another taxpayer bailout for Richard Branson from the Tories. The government needs to come clean on the restructuring plan, which must include the trade unions, agreed as part of the deal.”

However, the British Airline Pilots Association (Balpa) welcomed the plan with general secretary saying: “This is good news for 2,400 Flybe staff whose jobs are secured and regional communities who would have lost their air connectivity without Flybe.”

FlyBe overview

The domestic-regional airline is based in Exeter and has flown under different names over the course of 40 years. It is already receiving public money under a “public service obligation” government contract for the Newquay-Heathrow route.

It self describes as the largest independent airline in Europe – carrying eight million passengers each year, connecting 71 airports across the UK and Europe, with 189 routes spread around 12 countries.

Ryanair carries 154 million passengers annually with more than 2,400 daily flights from 241 airports in over 40 countries on more than 1,800 routes.

FlyBe is owned by Connect Airways Ltd a consortium formed in December 2018 by Virgin Atlantic (who own 30% of Flybe), Stobart Air (30% owners) and Cyrus Capital Partners (40% owners). The European Commission approved their £2.8 million takeover of FlyBe in 2019.

EC explainer

The European Commission is the politically independent executive arm of the European Union and is solely responsible for proposing legislation to be debated and passed by the European Parliament and Council of the EU. It also functions to implement the decisions and laws of the parliament and council to ensure EU law is properly applied in all member countries, and, it works with those two bodies to set the EU spending priorities, draw up the annual budgets and supervise how the money is spent (under scrutiny by the Court of Auditors.)

In short, the EC proposes and enforces EU law and looks after the money.

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