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Published on Tuesday, January 14, 2020

Government agrees Flybe rescue package

Business secretary Andrea Leadsom has announced that the Government has reached a rescue deal with Flybe. 

In a Twitter update, Leadsom said she was 'delighted' ministers had reached agreement with the airline's shareholders to keep the regional airline operating.

She said this would ensure that UK regions 'remain connected'.

The terms of the deal were not disclosed but it is believed Flybe has been given a three-month extension to pay its Air Passenger Duty bill of around £100 million.

The Government said there will also be a review in the March Budget of the way the air tax is applied to domestic flights, plus further discussion about a government loan in addition to a cash injection from investors.

Flybe was sold last year to a consortium led by Virgin Atlantic for £2.2 million. They are understood to have promised to pump £100 million of fresh equity into the airline if the government agreed a plan to ease its immediate cashflow crisis.

It is understood to have asked to defer its air passenger duty bill of around £106 million for three years.

Leadsom said the deal would be 'welcome news for Flybe's staff, customers and creditors and we will continue the hard work to ensure a sustainable future'.

Transport secretary Grant Shapps said his department would launch an 'urgent review into how we can level up the country by strengthening regional connectivity'.

Analyst Nigel Frith, a senior market analyst at Ask Traders, said it's 'no secret' how tough conditions are in the aviation industry right now.

"Flybe was the second airline (Thomas Cook) in four months to have be on the brink of collapse," he said.

"A clear silver lining from this situation has been a pledge by the government to review air passenger duty levied on domestic flights. A positive outcome from the review could give a helping hand improving the outlook for the industry."

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