Flybe: Coronavirus pushes airline to brink of collapse

flybe jetImage source, Getty Images

Struggling airline Flybe is facing fresh doubts over its future amid uncertainty about a rescue loan and the impact of coronavirus on its bookings.

Flybe is looking to the government to commit to helping the airline in the next few days if it is to survive.

But a £100m government loan to help stabilise the business is now unlikely to happen, the BBC understands.

The coronavirus impact on travel "has made a bad situation much worse," insiders told the BBC.

According to the FT, which first reported the news, the airline believes it has enough financial resources to survive "until the end of this month".

Flybe has been in discussions with the government about a loan of up to £100m to help it bridge the period between the lean months of winter - when airlines typically lose money - to the richer pickings in summer.

The government also agreed to consider a cut to airline passenger duty (APD). Currently, this £13 per person tax on short haul flying is levied per passenger leaving UK airports. That means that domestic routes pay the tax twice and Flybe has been pushing for the tax to be halved on internal UK flights.

Neither of these options now seem likely.

The BBC understands that changes to the Air Passenger Duty regime are constrained by the fact that the UK is still bound by EU single market rules until the end of the transition period at the end of this year. If changes to APD can't take effect before then, the government is reluctant to extend any kind of loan to an airline likely to continue to be loss making for the next nine months.

As one source put it "the government has always been worried it would be throwing good money after bad - and those worries have only intensified. the direction of travel on these issues has been apparent to the government and the company for weeks. The only thing that has changed is coronavirus."

Those worries have been amplified by the outrage of rival airlines that Flybe should be the recipient of tax payer money given the airline is owned by deep pocketed owners Virgin Atlantic, logistics company Stobart and multi-billion dollar US hedge fund Cyrus Capital.

It is thought the owners have injected enough money to keep the airline aloft until the end of March but if the mood music coming from government is right, this airline's troubled journey may soon terminate.

Flybe serves around 170 destinations and has a major presence at UK airports such as Aberdeen, Belfast City, Manchester and Southampton. It flies the most UK domestic routes between airports outside London.

Rival Ryanair has predicted the drop in demand for flights due to the coronavirus will result in some European airlines failing in the coming weeks.

In January, news that Flybe may benefit from government help, sparked a backlash from rivals. British Airways' owner IAG has filed a complaint to the EU arguing Flybe's rescue breaches state aid rules.

While, EasyJet and Ryanair said taxpayer funds should not be used to save a rival.

The government's proposal to cut Air Passenger Duty (APD), was also attacked by the rail industry's trade body and climate campaign groups.

Neither Flybe nor the Department for Transport would comment on the speculation

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