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Flybe: Should the government bail out the regional airline?

A Flybe flight departs from Manchester Airport, England, Monday Jan. 13, 2020.
A Flybe flight departs from Manchester Airport, England, Monday Jan. 13, 2020.   -   Copyright  Pete Byrne/PA via AP   -   Pete Byrne
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Should the UK government step in to save regional airline Flybe?

Discussions are underway over whether to grant tax relief to the carrier, which flies nine million passengers a year to 170 destinations across the continent, reports Associated Press.

Unions are among those urging Boris Johnson to intervene. They argue it would safeguard 2,000 jobs and preserve regional connectivity in the UK. The airline has a major presence outside London in places like Aberdeen, Belfast, Manchester and Southampton.

But environmentalists argue that the UK cannot be serious about tackling climate change if it then bails out an airline.

Uncertainty around Flybe's future comes a year after the carrier was bought by Connect Airways, a consortium of Virgin Atlantic, Stobart Group and Cyprus Capital. At that time, it paid just £2.2 million for Flybe's assets but pledged to inject cash into the airline to turn it around.

Up to now, Flybe has struggled with a succession of issues, including the weakening of the pound sterling, in view of pending Brexit.

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On Monday (January 13) Prime Minister Boris Johnson told the BBC that — despite recognising Flybe's importance across the UK — it isn't for the government to "step in and save companies that simply run into trouble."

We're working very hard to do what we can, but obviously people will understand that there are limits, commercially, to what a government can do to rescue any particular firm
Boris Johnson
British Prime Minister to BBC

He also added his wish to make sure to keep "the regional connectivity that this country needs".

Sky News is reporting that senior ministers will discuss whether Flybe could defer this year's estimated air passenger duty bill of £106 million (€123 million) for three years, giving it the chance to survive the tough winter trading conditions. Shareholders would be required to inject cash into the carrier as part of the deal.

Airline groups have long complained that the tax restricts growth. Passengers on domestic flights pay £26 (€30) in tax for a return trip - or more for longer flights or those in premium cabins.

The tax is expected to be worth £3.7 billion (€4.3 bn) to the Treasury in 2019-20.