The government is understood to be hammering out terms on a £100 million commercial loan to support the struggling regional carrier. It has reportedly drafted in Thomas Cook turnaround experts Alvarez & Marsal to advise ministers on what level of taxpayer support Flybe should receive.
Flybe has already been granted a deferral for some of its Air Passenger Duty (APD) bill to ease winter cash pressures, while its shareholders have pledged to make further investment in the business.
The airline was acquired by Virgin Atlantic-led consortium Connect Airways last year. Connect comprises Virgin, which is 51% owned by Virgin Group founder Richard Branson and 49% by Delta Air Lines, Stobart Group and private equity house Cyrus Capital.
However, Ryanair Group chief executive O’Leary said the tax break afforded to Flybe was in breach of competition law as it has not been extended to rival carriers.
IAG chief executive Willie Walsh, meanwhile, has lodged a complaint with the European Union over the government’s intervention, branding the decision “a blatant misuse of public funds”.
In an open letter to chancellor Sajid Javid dated 27 January, O’Leary said the government’s “time to pay” arrangement with Flybe in respect of APD was in breach of state aid rules, and called for Flybe’s owners to reach into their deep pockets.
O’Leary said Flybe had been bought “by a group of billionaires for just £2 million last year” in the knowledge that the airline was lossmaking.
He added that Flybe’s business model “of carrying small numbers of passengers, at very high fares, on half-empty turboprop aircraft has always failed” and had led it to “consistently lose money”.
He concluded: “If Richard Branson and his mates won’t lend £100 million to Flybe, then why should the hard-pressed British tax payer rescue them?”
