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Aviation: Flybe - in a mess again?

A year ago, the airwaves were full of stories speculating over the future of Europe’s largest regional airline, Flybe. The carrier had issued a profits warning and had put itself up for sale, predicated by Brexit uncertainty, weaker than forecast demand and currency fluctuations. Several suitors came forward but in the end the airline was sold to a consortium comprising Cyrus Capital, Stobart Group and Virgin Atlantic in a cut-price deal that left ordinary shareholders with almost nothing. The Aviation Oracle wrote extensively on the subject at the time, and when the takeover deal finally went ahead it seemed like the story had ended.

Are there dark skies ahead again for Flybe, of has government intervention fixed the problem?

The consortium suggested it would inject as much as £100m in the ailing regional, £20m to get it over its immediate problems and remove the threat from credit card acquirers withholding funds for future flight tickets, and a further £80m to turn around the business. Most observers assumed that the controversial signalled an end to Flybe’s woes, and in due course it would emerge rebranded as part of the much larger Virgin empire which would deliver it connecting traffic at the long-haul hubs of London Heathrow, Manchester and Glasgow. It was also presumed that Virgin Atlantic’s relationships with other carriers including Delta Air Lines, Air France and KLM would feed yet more passengers onto Flybe’s UK domestic and short-haul European services.

There was delay until the EU approved the acquisition in July, and the only obvious signs that progress was being made were the establishment of a place-holding website for the rebranded operation, the return of some expensive-to-lease aircraft to their owners, and route cutbacks at airports such as Doncaster, East Midlands and Cardiff. Beyond that there was a general optimism that Flybe would soon be on the right track again, especially if its patchy reputation for customer service and ancillary charges could be straightened out.

Government to the rescue

Then on Sunday January 12, 2020 the almost devastating news that Flybe was again on the brink of bankruptcy surfaced. Accountancy firm EY was supposedly on standby and mange the firm being put into administration, while last-ditch attempts to save the operation were launched through negotiations with the UK government. It later emerged that Flybe had requested deferring more than £100m of APD (air passenger duty) taxes that have to be paid to the treasury as a means of staving off the inevitable chaos that losing regional air connectivity at short notice would bring.


The talks finally paid off and it has been reported that the airline will be allowed to defer £106m of APD payments for three years. The government has also agreed to review the application of APD to domestic flights, partly in recognition that customers undertaking such trips incur two APD charges (outbound and return) while others travelling into Europe only pay once (for the UK departure). Quite what the review of APD will entail remains to be seen – and may be unveiled in March’s budget – but the commitment and the three-year deferral of payments appears to have calmed Flybe’s owners to the point where they are prepared to invest more in the business to tide it over the remaining lean winter months.