Flybe Lands Rescue Deal

The struggling airline Flybe has averted collapse after reaching a deal with the UK government that includes a tax holiday and the injection of tens of millions of pounds by its owners.

According to Sky News, HM Revenue & Customs (HMRC) has agreed to defer a substantial part of the regional airline's outstanding tax liability.

The agreement - reached between Flybe parent Connect Airways and the British government following hours of negotiations on Tuesday - will remove the immediate threat to 2,400 jobs at the Devon-based carrier that started life in 1979 as Jersey European Airways.

Sources said that discussions about a government loan to Flybe were continuing and could take some time to finalise.

UK Ministers have also agreed to conduct a review of Britain's regional connectivity, overseen by officials at the UK Department for Transport, while the Chancellor, Sajid Javid, will examine reforms to the way that Air Passenger Duty (APD) is applied to domestic flights.

Business Secretary Andrea Leadsom confirmed the deal in a tweet:

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.

— Andrea Leadsom MP (@andrealeadsom) January 14, 2020

The news came after 48 hours in which Flybe had teetered on the brink of collapse, with the accountancy firm EY placed on standby to oversee a potential administration.

The UK Transport Secretary Grant Shapps and Chancellor Sajid Javid also tweeted their backing for the rescue package:

Delighted we've been able to work closely with Flybe to ensure Europe’s largest regional airline is able to continue connecting communities across Britain. @transportgovuk will undertake an urgent review into how we can level up the country by strengthening regional connectivity.

— Rt Hon Grant Shapps MP (@grantshapps) January 14, 2020

Pleased that Flybe will continue to operate as normal. Levelling up means ensuring that our nations & regions are connected - so all our communities flourish in the years to come.

— Sajid Javid (@sajidjavid) January 14, 2020

Flybe has a significant presence at 25 airports across the British Isles and operates ten routes in and out of Jersey, including Birmingham, Exeter and Southampton.  It also has a franchise partnership with Blue Islands, which operates flights to Southampton, Guernsey, Bristol and London City under the Flybe brand.

News of its potential collapse worried local passengers and prompted the island's Health department to reassure patients that contingency plans exist for hospital transfers.

Jersey's Economic Development Minister Senator Lyndon Farnham has welcomed news of the rescue deal:

Welcome news that Flybe are to keep operating and especially good news for their customers, staff and creditors. Flybe are an important and valuable airline partner for Jersey and the other Channel Islands as well as a key UK regional air transport provider. https://t.co/fwXCDtj8Wg

— Sen. Lyndon Farnham (@lyndonfarnham) January 14, 2020

He later told Channel 103:

"I hope islanders will continue to support Flybe.  They are an incredibly important airline for our links with the UK and especially other regional airports. It is really important that we provide a robust network of air links for islanders.  I hope that Flybe will succeed into the future and islanders will get behind them."

The rescue package - which includes its owners beginning to inject more than £20m into the business - will provide Flybe with the working capital it requires to survive the tough winter months and implement a turnaround plan drawn up last year.

Connect Airways' other shareholders are Stobart Group and Cyrus Capital Partners, which are understood to have expressed reservations in recent weeks about committing further funding to the loss-making business.

The consortium which took control of Flybe's assets last year pledged to pump £100m into its turnaround plan, with the airline due to be re-branded as Virgin Connect later this year.

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."

Lucien Farrell, Connect Airways' chairman, added: "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."