BA owner files complaint with EU over taxpayers' Flybe rescue

James Sillars, business reporter

The parent firm of British Airways has lodged a complaint with the European Union over the UK government's support that is enabling Flybe to keep flying.

International Airlines Group (IAG) confirmed the move just hours after an angry statement from its chief executive Willie Walsh declared the rescue a "blatant misuse of public cash".

The complaint is based on the company's belief that it constitutes illegal state aid under EU law - but this was immediately dismissed by Downing Street which said it was operating within the rules.

The deal was struck on Tuesday evening, 48 hours after Sky News revealed that Flybe was in frantic talks to avert collapse.

The terms included the deferral of Air Passenger Duty (APD) payments, amounting to more than £100m, in return for the independent airline's major shareholders, including Virgin Atlantic, injecting tens of millions in new funds.

The measures, to date, mean 2,400 jobs at Flybe are safe for now but few details have been released.

The government is understood to still be negotiating a loan on commercial terms with the airline, casting continuing doubt on its long-term future.

The bailout reflects how seriously ministers view the threat to UK transport connectivity should Flybe, which focuses its operations between domestic regional airports, fall.

IAG's gripes include its belief that propping up "feeder flights" benefits Virgin and its partner Delta and hurts Aer Lingus - part of IAG.

In an earlier letter to the Transport Secretary Grant Shapps, Mr Walsh wrote: "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.

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"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."

Ryanair said of the rescue: "We have 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."

A spokesman for prime minister Boris Johnson said: "The government is fully compliant with state aid rules and
there has been no state aid for Flybe.

"Any support that is given would be made on strictly commercial terms."

Environmental campaigners also criticised the deal, particularly over the deferral of APD, and urged Mr Shapps to boost rail travel following the government's accompanying reviews which are to cover regional connectivity and domestic APD levels.

Friends of the Earth aviation campaigner, Jenny Bates, said: "Any review of APD that leads to cheaper air travel and more polluting flights, would be a complete scandal - and rip apart Boris Johnson's pledge to show leadership on the climate crisis."

Mr Shapps responded: "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.

"Any changes implemented as a result of our reviews of air passenger duty and regional connectivity will apply to all airlines in the competitive aviation market."

Sky News correspondent Inzamam Rashid at Flybee HQ, Exeter

On board a Flybe flight from London Heathrow to Newquay on Tuesday morning, I spoke to cabin crew who had no idea whether it would be their last-ever journey for the airline.

They were worried, tense and pessimistic about keeping their jobs - especially after the demise of Monarch and Thomas Cook.

But they had to carry on like there was no issue. They sprung into action - helping a passenger who had a panic attack after we battled through Storm Brendan and were diverted to Bristol Airport about 150 miles away.

To me, it was obvious the wait and the worry of the past few days had been agony.