Sky News reports Alvarez & Marsal (A&M) will guide ministers on any potential taxpayer cash support for the struggling regional carrier, which was bought out by Virgin Atlantic-led consortium Connect Airways last year and is due to be rebranded Virgin Connect this year.

Flybe is seeking a £100 million government loan to stave off further winter pressures. It comes after Flybe struck a deal with the government earlier this month to defer some of its Air Passenger Duty (APD) bill. The companies shareholders have pledged to make further investment in the business.

According to the Sky, A&M has been in talks with Flybe, owner Connect and government officials in recent days over the terms of a commercial loan.

The government last week insisted such a move would not amount to state aid, despite protestations from IAG chief executive Willie Walsh and Ryanair boss Michael O’Leary, who has called for Flybe’s so-called “APD holiday” to be extended to competitors.

Chancellor Sajid Javid said the agreement with Flybe on APD was a “standard ‘time to pay’ arrangement” owing to its “short-term” financial troubles.

The negotiations around Flybe, which operates a number of government subsidised regional routes, are expected to form part of a review of UK regional connectivity, likely – Sky News reports – to allow the government to subsidise more routes.

’Critical regional connectivity’

A Flybe spokesperson said: “Flybe delivers critical regional connectivity across the UK and Europe, including providing more UK domestic flights than any other airline.

"We are currently working with our shareholders and the government, all of whom are very supportive of the business, in order to deliver our long term strategic plan.

"Throughout this process we are continuing to provide great service and connectivity for all customers travelling on our network.”

TTG has approached the DfT and A&M for comment.