British Airways owner complains to European Commission over Flybe rescue deal

15 January 2020, 12:50

British Airways and Aer Lingus owner International Airlines Group (IAG) have filed a complaint with the European Commission over the Flybe rescue plan.

The companies have claimed the Government's decision to rescue Flybe from collapse breaches state aid rules and gives the struggling airline an unfair advantage.

In a letter to the EU's competition directorate, IAG claim that the rescue deal announced on Tuesday, which could include a £100m loan and deferral of an outstanding tax bill, breaches state aid rules.

The move came hours after IAG chief Willie Walsh publicly criticised the move, describing it as a "blatant misuse of public cash".

He asked in a letter why the taxpayer was being asked to foot the bill as one of Flybe's biggest shareholders was Virgin Atlantic, which in turn is part-owned by US aviation giant Delta.

The Treasury announced on Tuesday evening that the loss-making regional carrier would continue operating after agreeing to review air passenger duty .

Flybe shareholders agreed to inject extra capital into the airline business as a result, securing the short-term future of 2,400 jobs.

Business Secretary Andrea Leadsom announced the deal on Twitter, saying she was "delighted" to save the company, which handles over half of Britain’s domestic flights outside London.

She added: "Delighted that we have reached agreement with Flybe's shareholders to keep the company operating, ensuring that U.K. regions remain connected. This will be welcome news for Flybe's staff, customers and creditors and we will continue the hard work to ensure a sustainable future."

Flybe's shareholders agreed to a cash injection - understood to be in the region on tens of millions of pounds - to keep it in business "alongside Government initiatives".

Lucien Farrell, chairman of Connect Airways, said: "We are very encouraged with recent developments, especially the Government's recognition of the importance of Flybe to communities and businesses across the UK and the desire to strengthen regional connectivity.

"As a result, the shareholder consortium has committed to keep Flybe flying with additional funding alongside Government initiatives."

And Mark Anderson, Flybe's chief executive, said: "Flybe is made up of an incredible team of people, serving millions of loyal customers who rely on the vital regional connectivity that we provide.

"This is a positive outcome for the UK and will allow us to focus on delivering for our customers and planning for the future."

Earlier today it was reported that Flybe could potentially be offered to defer a £100m tax payment until 2023 if investors pump tens of millions of pounds into the airline.

LBC reporter Matthew Thompson confirmed that the EU could still rule against the bailout, even after the UK leaves the bloc on 31 January.

Responding to the bailout, Andy McDonald MP, Labour’s Shadow Transport Secretary, said: “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.

“Any cuts to air passenger duty will encourage the small number of wealthy frequent flyers who are responsible for 70 per cent of all trips to fly even more, increasing carbon emissions.

"A review into slashing aviation tax makes a mockery of the government's climate commitments.”