UK Governments agrees £106m rescue deal for Flybe

Ministers have signed off on a rescue plan for Flybe in a bid to stave off the troubled airline's collapse.

Business Secretary Andrea Leadsom said the package, which includes a repayment plan for a tax debt thought to top £100m, would help to protect jobs and give the firm a "sustainable" future.

Flybe, the biggest regional airline in Europe, had been forced to seek emergency funding amid heavy losses.

The airline runs many of the UK's domestic flights outside of London, including flights to and from Aberdeen, Edinburgh, Glasgow, Inverness and Wick, carrying some 8 million passengers a year.

Under the terms of the multi-million-pound rescue deal, Flybe's shareholders will be asked to put more into the business while the UK Government is believed to have deferred an outstanding £106m air passenger duty bill until the spring.

The UK Government will also carry out a wider review of air passenger duty, which adds a £26 charge to short-haul return flights.

Leadsom said she was "delighted that we have reached agreement with Flybe's shareholders to keep the company operating, ensuring that UK regions remain connected".

And she added: "This will be welcome news for Flybe's staff, customers and creditors and we will continue the hard work to ensure a sustainable future."

The news has been welcomed by trade union the British Airline Pilots Association, which said the package was "good news for 2,400 Flybe staff whose jobs are secured and regional communities who would have lost their air connectivity without Flybe."

Flybe's boss Mark Anderson said: "This is a positive outcome for the UK and will allow us to focus on delivering for our customers and planning for the future.

"Flybe is made up of an incredible team of people, serving millions of loyal customers who rely on the vital regional connectivity that we provide."

However, the decision to review air passenger duty has already sparked anger among environmental campaigners, who argue that the tax helps to reduce carbon emissions by deterring short-haul flights.

Green MP Caroline Lucas said the move was "utterly inconsistent with any serious commitment" to tackle climate change.

"Domestic flights need to be reduced, not made cheaper," she said.

But Transport Secretary Grant Shapps defended the decision to review the levy.

"Air passenger duty is not designed as an environmental tax," he told ITV News.

"But actually, I think that we can do far more by reviewing the way it works. 

"I'll give you a simple example: there are now aircraft that are being designed and about to start flying which fly on electricity. They're going to do the island hops in Scotland. 

"And actually, we should be shaping our regional airports so that they become greener and they're able to fly using hybrid and zero carbon approaches like electric.

“That's the future and that's where we want to get to. And that's what this review will look into."