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Flybe deal ‘a blatant misuse of public cash’

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THE UK government is facing a fierce backlash from airlines for rescuing Flybe – with one rival branding it a ‘blatant misuse of public cash’ and lodging a formal complaint with the EU.

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The immediate future of the struggling operator was secured late on Tuesday after ministers agreed to a package of measures, including a potential loan and allowing it to defer payment of £100 million in air-passenger duty.

As part of the deal, Flybe shareholders agreed to inject extra capital into the business, securing the short-term future of 2,400 jobs and the company’s network of regional routes.

But the move has been heavily criticised by rival firms, including British Airways’ owner IAG, which has filed a complaint with the EU, claiming that the deal breaches state aid rules and gives the airline an unfair advantage.

In a letter to UK Transport Secretary Grant Shapps, IAG’s chief executive Willie Walsh voiced serious concerns over the use of taxpayers’ cash.

‘Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for taxpayers to fund its operations by subsidising regional routes,’ he wrote.

‘Virgin/Delta now wants 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.’

Under the deal, the government has also proposed to review air-passenger duty on all regional flights.

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Airlines, including easyJet, have criticised the state support, while also praising the decision to review APD.

Johan Lundgren, chief executive of easyJet, said: ‘We do not support state funding of carriers but without the detail of what is exactly proposed, it is hard to comment further.

‘Having said that, what is clear is that taxpayers should not be used to bail out individual companies especially when they are backed by well-funded businesses.’

According to the BBC, Ryanair has 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’.

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The UK government has also faced criticism from industry groups, given the perceived need for financial support and action in other sectors.

Kate Nicholls, from the UK Hospitality trade body, said: ‘If APD can be reviewed and waived to support Flybe then business rates should be cut and reviewed to stem the continued high-profile casualties on the high street and in hospitality.

‘Hospitality pays a third of its revenue in taxes, slashing its margin to operate.

‘Many businesses have been literally taxed out of existence and we want to see the government taking a similarly supportive approach to deliver on its manifesto.’

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