Business

Complaint made to EU over "blatant misuse of public cash" in Flybe rescue deal

The British government's decision to rescue Flybe has been described as "a blatant misuse of public cash" and it to be challenged in the EU by British Airways owner IAG
The British government's decision to rescue Flybe has been described as "a blatant misuse of public cash" and it to be challenged in the EU by British Airways owner IAG The British government's decision to rescue Flybe has been described as "a blatant misuse of public cash" and it to be challenged in the EU by British Airways owner IAG

THE government's decision to rescue regional airline Flybe from collapse - a move welcomed by the north's business community - has been described as "a blatant misuse of public cash".

And it emerged that British Airways owner International Airlines Group (IAG) has filed a complaint with the European Union, claiming the deal for Flybe breaches state aid rules and gives the struggling airline an unfair advantage.

The Treasury announced on Tuesday evening that the loss-making regional carrier, which is the main carrier from Belfast City Airport, serving 14 destinations, would continue operating after agreeing to review air passenger duty (APD).

Flybe shareholders agreed to inject extra capital into the airline business as a result, securing the short-term future of 2,400 jobs.

Flybe is owned by Connect Airways, a consortium involving Virgin, Stobart Aviation and Cyrus Capitals, which purchased the airline at the start of last year.

It is understood that IAG's complaint claims that the government is propping up "feeder flights" that benefit Virgin and Delta.

Transport Secretary Grant Shapps highlighted that supporting "regional connectivity" was a key reason for the government's agreement with Flybe shareholders.

Irish-born IAG boss Willie Walsh also blasted the deal, saying it "makes a mockery" of previous promises made by Flybe about the expansion of regional flights.

Other airline rivals, such as easyJet, have also criticised the state support, while also praising the decision to review APD.

It comes as CBI Northern Ireland director Angela McGowan welcomes the Flybe rescue plan, describing it as a massive relief to all the staff who work at the company and communities who rely on the vital links Flybe provides.

She said: “In the package is an important step to review regional connectivity. This is something we are keen to support, as better transport links outside the south-east is fundamental to the government’s ambitions to ‘levelling up’ the country’s economic performance.

“More broadly, the new government has a huge opportunity to look at the overall cost of doing business and to support growth through high quality, sustainable infrastructure. That’s what will ultimately drive shared prosperity and level up growth across the UK.”

Adam Ewart, founder of Belfast-based luggage delivery business SendMyBag, described Flybe as being a crucial link between the north and mainland UK, and without the routes it operates, said the City Airport would be reduced to just four flight routes.

He added: “While its air passenger duty will be reduced, this is far from a long-term solution. The low-cost airline industry is highly competitive, requires significant capital investment and is particularly susceptible to fluctuations in fuel prices, currency exchange rates and consumer habits – and Flybe now spends a third of its total outgoings on highly changeable costs like fuel.

“Flybe customers have been frustrated time and again, with hidden costs such as excess baggage fees mounting over the past years. Now, they’re voting with their feet and avoiding airlines that shamelessly take money from their pockets.

“It’s high-time other budget providers heed the lessons from Monarch and Flybe, and stop putting profit before consumers.”