The government has secured a rescue deal with regional airline Flybe as the carrier seeks to overcome financial difficulties.

Business secretary Andrea Leadsom confirmed the move earlier, saying the government was “delighted” to have reached an agreement with shareholders to keep Flybe in the air.

The deal was backed by transport secretary, Grant Shapps, and chancellor, Sajid Javid.

The terms were not disclosed by the government.

However, it is believed Flybe has been given a three-month extension to pay its air passenger duty bill.

It is thought the delay could see the airline defer payments of up to £100 million.

The government said there would also be a review of the way the tax is applied to domestic flights in the March budget.

A £26 charge is applied to all flights taking off from UK airports, with the cash ostensibly going to fight the environmental impact of aviation.

Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that U.K. regions remain connected. This will be welcome news for Flybe’s staff, customers and creditors and we will continue the hard work to ensure a sustainable future.

— Andrea Leadsom MP (@andrealeadsom) January 14, 2020

Flybe was sold last year to a consortium led by Virgin Atlantic and Stobart Air for £2.2 million.

They are understood to have promised to inject up to £20 million of fresh equity into the airline if the government agreed a plan to ease its immediate cashflow crisis.

Flybe will later this year be renamed Connect Airways.

Green concerns

Green Party leader, Caroline Lucas, attacked the proposal to potentially cut passenger taxes on domestic flights.

She said: “Addressing Flybe problems by reducing air passenger duty on all domestic flights is utterly inconsistent with any serious commitment to tackle the climate crisis.

“Domestic flights need to be reduced, not made cheaper.”

IAG

From a different angle, International Airlines Group chief executive, Willie Walsh, was also highly critical of the deal.

The aviation leader argued the move was a misuse of public funds.

In a letter to Shapps, Walsh said: “Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for taxpayers to fund its operations by subsidising regional routes.

“Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline.

“This is a blatant misuse of public funds.

“Flybe’s precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built.”

Walsh argued Virgin Atlantic and partner Delta Air Lines – which yesterday posted its best ever results – had the funds to independently rescue Flybe.