Flybe deal up in the air as new Chancellor could scrap tax cut

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According to The Daily Telegraph, the UK’s new Chancellor, Rishi Sunak, could soon abandon a planned overhaul of air passenger duty – one part of a wider package put forward last month to help the ailing Exeter-based company.

The newspaper adds that the airline’s backers, which include Sir Richard Branson, have warned that the tax cut is essential for its survival.

Meanwhile, it is claimed that the UK government is ramping up its contingency plans to deal with stranded passengers if Flybe goes under – with a charter airline said to have been appointed to repatriate people should it become necessary. Multinational financial services firm EY have also reportedly been put on notice to deal with the company’s potential administration.

Mr Sunak is thought to be against a cut in air duty, a crucial factor in Flybe’s rescue deal, which allegedly included the deferral of £105 million of air passenger duty and a possible £100 million bridging loan.

Ryanair chief executive Michael O’Leary has demanded that the ‘tax holiday’ be extended to other airlines. He also claimed that Flybe would ‘undoubtedly fail once the subsidy ends’. IAG, parent group of airlines including British Airways, Aer Lingus and Iberia, has filed an official complaint with the EU, saying the deal breached state aid rules.

However, The Daily Telegraph is reporting that talks are continuing to provide Flybe with a loan and that Grant Shapps, the UK transport secretary, is ‘broadly in favour’ of supporting the airline.

In a statement, a spokeperson for Flybe said that they continued to make ‘good progress’ towards securing a financial package that would secure its long-term success.

‘Ahead of finalising this agreement, the airline is being supported by its shareholders and leading suppliers, is managing its cash position carefully and currently has strong liquidity,’ they said.

‘We are pleased to say that our bookings have returned to normal levels and we are grateful for the confidence that our customers, suppliers, airport partners and the Civil Aviation Authority have shown in us.

‘Spurred on by this overwhelming demonstration of support, we have in the past week delivered the best operational performance in three years. There remain real challenges ahead but the achievements of the past few weeks have given us renewed determination and shown us what is possible.’

Flybe currently operates routes from Jersey to Birmingham, Southampton, Exeter, Guernsey, Aberdeen, Durham Tees Valley, Manchester, Geneva and Inverness.

Blue Islands, which operates routes under Flybe branding to Guernsey, East Midlands, Newquay, Bristol, Southampton and London City is not affected.

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