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UK prepared to subsidize more Flybe routes

Flybe Embraer E195
Flybe Embraer E195, © Flybe

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LONDON - Struggling British regional airline Flybe is in talks with the government about a loan on commercial terms which would not represent a state bailout. Flybe might also see more of its routes subsidised by the government under the PSO scheme to maintain regional connectivity.

British Airways and Ryanair have opposed government-backed support for Flybe, saying it prevents a level playing field and breaches state aid rules, although the details of the plan have not been made public.

The government has said that its support for Flybe, which provides links between many regional UK and European airports, does not breach EU rules on state aid. Flybe's boss Mark Anderson said any government help would be made on commercial terms, the BBC reported, citing an address he gave to Flybe staff.

"We are in conversation with the government around a financial loan - a loan, not a bailout - a commercial loan, but that is the same as any loan we'd take from any bank," the BBC quoted Anderson as saying.

Flybe was rescued from near collapse last week, when its shareholders agreed to invest more money alongside government.

The airline declined to comment on the BBC's report of what Anderson said, but did say that it had agreed with Britain's finance department a payment plan for a debt of less than 10 million pounds ($13.1 million).

"This agreement will only last a matter of months before all taxes and duties are paid in full. This is a standard 'Time to Pay' arrangement with HMRC that any business in financial difficulties may use," a spokesman for Flybe said in an email.

Flybe is owned by Connect Airways, a consortium created by Virgin Atlantic, Stobart Group and investment adviser Cyrus Capital. They bought the struggling airline last year and have already provided it with 110 million pounds of funding.

But the airline's losses were such that the new funding was used up quickly, Anderson is reported to have said.

"Three-quarters of the money the shareholders invested was gone before we even really started. That has hurt this business and more money is needed," the BBC quoted Anderson as saying. But he tried to reassure staff about Flybe's future.

"We are not making millions of profit at the moment but if we stick to the plan, and what we have to do, we will," he said. UK Infrastructure company Stobart said on Thursday it was providing 9 million pounds of funding for Flybe as part of this week's government-backed deal.

Bloomberg reports Flybe might see more of its routes covered by the PSO mechanism. So far only its London - Newquay and Cardiff - Angelsey services receive governmental funding.

The government will "consider a number of options for ensuring that we continue to have good regional connectivity, including existing policy levers such as PSOs", a spokesperson for the Department of Transport told Bloomberg.
© Reuters, aero.uk | Image: Flybe | 22/01/2020 08:10


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