Flybe collapses two months after government announces rescue

 

A Flybe plane takes off from Manchester airport. It operates almost 40% of UK domestic flights. Photograph: Phil Noble/Reuters

Impact of coronavirus on flight bookings proves final straw for Europe’s largest regional airline

Flybe, Europe’s largest regional airline, has collapsed into administration less than two months after the government announced a rescue deal.

The impact of the coronavirus on flight bookings proved the last straw for the Exeter-based airline, which operates almost 40% of UK domestic flights, as the government stalled on a controversial £100m loan.

Flybe falls prey to coronavirus and ‘stronger’ airlines are likely to follow

Flybe’s bankruptcy has come just a week before a budget that it hoped would help bolster its precarious finances, after the previous chancellor said he would look again at levels of air passenger duty (APD) .

However, the airline’s owners Connect Airways – a consortium of Virgin Atlantic, Stobart Air and hedge fund Cyrus Capital – have pulled the plug, a little over a year after buying it.

The airline employed more than 2,000 people and was one of the leading carriers at airports including Belfast, Southampton, Manchester and Birmingham. Around 8 million people a year used its services. Unions have warned that other jobs would be put at risk by Flybe’s collapse, and transport links lost on dozens of domestic routes where it is the sole operator.

Flybe has long struggled to balance the books, despite cost-cutting plans and redundancies, and was reporting losses of around £20m a year before the Connect takeover.

With the new government having promised to “level up” the economy, it was anxious to demonstrate it was helping the ailing airline and ministers announced the Flybe rescue in January. However, the measures – which included some deferral of tax, a potential loan, and promises to review regional air connectivity and APD levels – have not proved enough.

Public anxiety and curbs on business travel due to the coronavirus outbreak have forced airlines around the world to retrench in the face of falling bookings, and Flybe was also suffering from the drop in demand.

Virgin Atlantic itself is having to make significant cuts, and earlier on Wednesday announced it was putting in place crisis measures – including cutting executive pay, freezing hiring and pay rises, and offering unpaid leave to staff – as bookings at the airline have fallen by almost 50% in the last week due to Covid-19 fears.

The government has been unwilling to bail out Flybe, despite calls from unions and MPs in the regions, with other airlines, led by British Airways owner IAG and Ryanair, objecting about the prospect of state aid and threatening legal action.

It is the second major British airline to go bankrupt in six months, following the collapse of Thomas Cook last September.

Unite national officer, Oliver Richardson, said it was “outrageous” that the government had not learned the lessons of the collapse of Monarch and Thomas Cook. He said Flybe staff would be feeling “angry and confused”.

“The UK economy is highly dependent on a viable and supported regional airline and airport network,” he said. “For central government not to support and nurture this, especially as we deal with the twin uncertainties of the Covid-19 virus and the changes that will come with Brexit, is unhelpful and irresponsible.”

Andy McDonald, shadow transport secretary, said the loss of Flybe would cause “real anxiety” throughout the country.

source -guardian.com

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