Outgoing BA boss Willie Walsh today blasted the Government’s rescue of Flybe calling the £100million deal a ‘blatant misuse of public funds’.
Mr Walsh says the regional airline’s owners, Richard Branson’s Virgin Atlantic and US-giant Delta, who both turn huge profits each year, should have put their hands in their deep pockets.
He has written to Transport Secretary Grant Shapps and demanded to know why Britain’s taxpayers must pick up the bill when the airline has been mismanaged by its wealthy bosses.
And he says Flybe already has an unfair advantage over rivals, including BA, who are blocked from routes from London to smaller regional airports such as Newquay in Cornwall.
The chief executive of IAG, BA’s parent company, 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.
Outgoing BA boss Willie Walsh is unhappy about the bailout of Flybe because of its rich owners
Flybe shareholders have struck a deal with the British government to keep the regional airline operating, business minister Andrea Leadsom said on Tuesday
‘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.’
Irish ex-pilot Mr Walsh, 58, will leave the chief executive role and board of IAG on March 26 and retire on June 30, before being succeeded by Iberia chief executive Luis Gallego.
Mr Walsh, chief executive of British Airways between 2005 and 2011, was known for orchestrating the successful creation of International Airlines Group (IAG) through the merger of BA and Spanish carrier Iberia.
The executive has never been far from controversy and was dubbed ‘The Slasher’ for his reign at Aer Lingus which he turned round by slashing 2,500 jobs, he has presided over several BA disasters and customers complaining about a sharp decline in levels of
The future of Britain’s biggest regional airline had been hanging in the balance, with backers including Virgin Atlantic preparing to call in administrators.
But ministers said they had secured a commitment from Flybe’s owners to continue operating after promising to review air passenger duty on domestic flights. Plans to cut the levy – currently £26 for a return flight in the UK – could be announced in the Budget in March.
The Government has also promised to review regional transport links which will look at subsidising more flights to remote parts of the UK.
Flybe had also been trying to persuade ministers to defer a £106million air passenger duty bill until 2023. But there are concerns that it could breach EU state aid rules.
Business minister Andrea Leadsom said last night she was ‘delighted’ to have reached an agreement with the embattled airline – as ministers reportedly discussed whether the regional carrier could defer paying an estimated £106 million air passenger duty bill.
Ms Leadsom said: ‘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.’
Ms Leadsom said: ‘Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that U.K. regions remain connected’
A senior Whitehall source last night claimed Flybe was not set to run out of money. However, bosses were not prepared to continue racking up big losses unless they extracted commitments from the Government.
The emergency agreement seeks to prevent Flybe becoming the second UK carrier to fail in four months after Thomas Cook went bust in September.
Based in Exeter, the airline employs about 2,000 people and is owned by a consortium led by Virgin Atlantic. It carries around eight million passengers annually and flies to 170 destinations around Europe from its British hubs.
The deal was announced after 48 hours of fraught negotiations. It will come as a relief to Flybe’s workers and tens of thousands of people who have booked flights with the airline.
Chancellor Sajid Javid said: ‘I welcome Flybe’s confirmation that they will continue to operate as normal, safeguarding jobs and ensuring flights continue to serve communities across the whole of the UK.’
The Government previously refused to step in to help Monarch Airlines and Thomas Cook, which collapsed in September. But allowing an airline which operates two in five UK domestic flights outside London to go under would have undermined its manifesto pledge to boost regional economies and improve connectivity outside the capital.
Airports which depend heavily on Flybe include Anglesey, Southampton, Belfast, Exeter and Newquay. Air passenger duty is set to raise £3.9billion this year. Flybe was bought by investors, including Virgin Atlantic, for £2.8million in 2019.
It comes after Boris Johnson said ministers would not ‘step in and save’ Flybe amid claims air passenger duty could be cut
They promised to invest £100million in a turnaround plan, but losses have since escalated.
Airlines claim APD restricts connectivity and passenger growth.
Passengers on domestic flights pay £26 in APD for a return trip, with higher rates for longer flights and premium cabins.
The tax is expected to be worth £3.7 billion to the Treasury in 2019/20.
Flybe is the main carrier operating in several smaller British cities, including Exeter and Southampton in the southwest and south.
Lawmaker Stephen Farry, who serves a constituency in Northern Ireland, said he feared that if Flybe disappears it would hit connectivity between the province and Britain and he would be taking the matter up with the UK’s Department for Business.
Transport Secretary Grant Shapps also welcomed today’s agreement.
He said: ‘Delighted we’ve been able to work closely with Flybe to ensure Europe’s largest regional airline is able to continue connecting communities across Britain. @transportgovuk will undertake an urgent review into how we can level up the country by strengthening regional connectivity.’
Boris Johnson had said ministers would not ‘step in and save’ Flybe amid claims air passenger duty could be cut on all domestic flights in Britain – saving travellers £13 a trip.
Flybe has long claimed that APD is unfair by disproportionately affecting domestic customers who must pay it every time they take off from a UK airport.
ALEX BRUMMER: Plight of Flybe is the first big test for Tories’ plan to help regions soar
By Alex Brummer for the Daily Mail
As a passionate believer in the free market system, I have long opposed wholesale interventions to rescue badly-run companies.
But, given the state of Britain’s left-behind regions and the high expectations of their citizens after turning out to vote for Boris Johnson in such numbers, now was the right time to change tack.
The plight of the regional airline Flybe presented an early test of the Government’s commitment to the provinces. It has managed to secure the future of the company with promises to review the tax burden which almost brought its collapse and to look at the whole vexed question of transport connections to and from – and within – Britain’s depressed regions.
No10’s claim to be ready to extend a helping hand to spread prosperity across the country has been borne out by yesterday’s events. The most likely outcome is that Flybe and other UK domestic carriers will be relieved of paying some or all of the onerous Airline Passenger Duty (APD).
While passengers making return journeys to continental destinations pay a flat fee of £13, domestic flyers are charged APD on each leg – there and back – adding up to a total of £26. This oppressive tax has damaged the expansion of regional travel in the UK and has put major British-based global carriers at a disadvantage compared with their overseas rivals.
It arose from pledges by successive British governments not to increase income taxes and VAT – a stance that shifted the burden of fundraising to stealth taxes. As a result, just as the high street has been vandalised by iniquitous business rates so the airlines have been damaged by passenger duty.
However, the Government’s involvement in propping up Flybe, which operates half of all domestic flights out of London and carried 8.6million passengers last year, will not be popular with everyone.
The biggest and most potent argument against a bail-out is that it will set a precedent for rescuing every failing company which comes knocking on the Government’s door. Past supplicants include outsourcing-to-construction giant Carillion and emblematic travel group Thomas Cook, both of which were abruptly and painfully turned down by the Government.
Supporting an airline in these days of climate change awareness will also put Johnson’s Government on the back foot with eco-activists. Sharpest criticism of all will come from free-market fundamentalists who recall only too well Labour’s efforts to bail out the car industry in the 1970s.
The goal is to rename the regional carrier Virgin Connect, imbuing it with the brand power of Branson (Richard Branson, pictured above)
The truth is that, had the Government not intervened then, the revival of British motor manufacturing – including marques such as Jaguar, Land Rover and Mini, all now under private ownership – might never have taken place. And Britain’s world class aero-engine giant Rolls-Royce would be out of business.
But the numbers are eye-watering. A change in airline passenger taxes to keep Flybe in the sky could cost the Exchequer hundreds of millions of pounds, especially if it is applied to other carriers too.
Which begs the question as to why Flybe’s wealthy owners – led by Richard Branson’s Virgin Atlantic (owned partly by Delta and Air France) – were so quick to pull the rug from under the company. They look to have been engaged in brinkmanship designed to force a tax change and a renewed focus on regional connectivity. It is less than a year since Flybe was bought for a knockdown price of £2.8million. Tory ministers needed iron-clad assurances from the owners that they would continue to keep the carrier in the skies in exchange for the tax review.
The goal is to rename the regional carrier Virgin Connect, imbuing it with the brand power of Branson, and to feed its routes into the broader Virgin Atlantic network.
But ministers must be acutely aware that by engaging so actively with Flybe and its shareholders they will come under pressure to prop up struggling firms in other sectors.
The British Steel complex at Scunthorpe, for example, is teetering on the brink.
Following yesterday’s move, the Government is in danger of sending out a signal that state intervention is acceptable once again. Yes, it’s a massive doctrinal shift, but it may be the price to pay for healing the regional divide.