Flybe lifts lid on taxman's aid as rivals continue to cry foul

David Mercer, news reporter & James Sillars, business reporter

Struggling airline Flybe has attempted to explain the help it is getting from the taxman - as the government comes under more pressure over the deal it struck to keep the company going.

Amid anger over the rescue among rivals, Flybe said the arrangement made with HMRC amounted to a standard "payment plan" that would settle debts of less than £10m, in full, within months.

The regional airline was rescued from the brink of a collapse, saving more than 2,000 jobs, earlier this week after Sky News revealed frantic talks with the government.

Flybe's rivals have demanded answers and threatened court action over the deal with Flybe's owner, Connect Airways.

It was done, the government says, to safeguard regional connectivity and denies claims it breaks EU state aid laws.

Flybe said: "This is a standard Time to Pay arrangement with HMRC that any business in financial difficulties may use."

But Ryanair boss Michael O'Leary told Sky News the granting of special treatment over Air Passenger Duty (APD) debts amounted to a "nasty subsidy" and said the "tax holiday" given to Flybe should be extended to other airlines.

In a letter to Chancellor Sajid Javid, Mr O'Leary accused the government of distorting fair competition between airlines, and accused it of giving a subsidy to Flybe's billionaire owners.

Flybe was last year taken over by a consortium led by Sir Richard Branson's Virgin Atlantic - which is 49% owned by America's Delta airline - together with infrastructure group Stobart and hedge fund Cyrus Capital.

Meanwhile, British Airways and Aer Lingus owner International Airlines Group (IAG) has written to the Treasury, as well as transport and business departments, to ask a series of questions over the deal.

It wants to know if the government is a "financial guarantor" to Flybe, whether a tax deferral has been agreed and what reassurances have been made by the owners.

The questions, sent in a freedom of information request, are being asked "due to a lack of transparency about the government's involvement in the rescue package for Flybe", IAG says.

The carrier remains in talks with the government over a possible loan - on commercial terms.

Ministers are yet to comment on the details of what has been agreed to date.

Meanwhile, Flybe's boss Mark Anderson has told Flybe staff that the company had had a few "difficult days" this week but it still had "a great future", the BBC reported.

In a separate announcement, Flybe said that in March it would replace its service between Heathrow and Newquay in Cornwall with flights from Newquay to Gatwick.

Flybe said its decision, which attracted criticism on social media, marked "the beginning of a stronger, more resilient service for our customers travelling to and from Cornwall".

As part of its summer 2020 schedule, it also announced it would operate six flights a week to Amsterdam's Schiphol airport and an extra five flights a week to Manchester as part of an additional 1,149 flights from 29 March.