The government should consider reducing the air passenger tariff on all domestic flights as part of a plan to save the regional airline Flybe from collapse.
Chancellor Sajid Javid will later meet with the business and transportation departments to discuss the tax reduction, says the BBC business editor.
The change would allow Flybe to defer a tax bill and implement a rescue plan.
By applying the movement to the entire industry, the government would avoid violating EU state aid rules.
It could also improve regional connectivity, a key promise of the conservative manifesto.
Sky News reports that the possible air passenger service agreement could make Flybe defer a payment of more than £ 100 million for three years.
Potentially, it would give the Exeter-based company time to establish a recovery plan, funded by a consortium led by Virgin Atlantic that rescued the airline a year ago.
It would also secure more than 2,000 Flybe jobs that are at risk if the company fails.
- Flybe’s boss ‘focused’ on changing the airline
- Why Flybe is important: ‘valuable connectivity’
The air passenger tax (APD) is charged on all passenger flights from the UK airports, except Northern Ireland and the Highlands and Islands of Scotland.
The amount depends on the destination and the kind of trip. Under current rules, passengers on domestic flights pay £ 13 in APD for a single trip, with higher fares for longer flights and premium cabins.
Flybe has long been a critic of the air passenger service, who said he disproportionately charges his national customers because they have to pay every time they take off from a UK airport.
Changes in air passenger tariffs could reduce the billions of pounds that the charge generates for the government, which is expected to reach £ 3.7 billion this financial year, according to the Office of Budget Responsibility.
But Prime Minister Boris Johnson made the improvement of transport links in the regions of the United Kingdom a central plank of the Conservative Party manifesto.
The besieged Flybe asked the government to consider deferring tens of millions of pounds that it owes in the airport service to help prevent the collapse of the largest regional airline in Europe.
That presented the government with two problems.
First, the creation of what Prime Minister Boris Johnson previously described as a “moral hazard,” a dangerous precedent that would lead companies in difficulty to believe they could rely on the government to help them if they were in financial difficulties.
Second, any company-specific assistance probably does not comply with EU rules on state aid.
The solution? A reduction in the airport tariff industry for domestic flights in the United Kingdom.
That proposal will be discussed at meetings between the Treasury, the Department of Transportation and the Department of Businesses scheduled for later today.
It gives the government the opportunity to help Flybe while fulfilling its promise to improve regional connectivity.
But it has a cost to public finances and can be criticized for making it difficult to keep promises to reduce carbon emissions in the United Kingdom.
Flybe transports around eight million passengers a year from airports such as Southampton, Cardiff and Aberdeen, to the United Kingdom and Europe.
Its route network includes more than half of the UK’s domestic flights outside of London.
A group of local councils in Devon, where Flybe is based, said: “We are aware that certain aspects of national policy, in particular the air passenger service regime in relation to domestic flights, have a significant impact on the business model of the company “.
Flybe was about to collapse a year ago, but was rescued by Virgin Atlantic, the owner of the Southend Stobart Group airport and the Cyrus Capital Partners hedge fund.
They paid £ 2.8m for the airline and agreed to invest £ 100m in the loss business.
Flybe has refused to comment on talks about a rescue.
Its executive director, Mark Anderson, told staff on Monday that the airline continues to operate normally.
“I appreciate that the headlines that some of you have already read are disturbing, but I want you to know that we are determined to do everything possible to make this work,” he said.
As long as Flybe keeps flying, there is no need to worry and there is certainly no reason to try to get your money back, writes Simon Gompertz, personal finance correspondent for the BBC.
However, if the airline failed, all flights would probably be canceled. Those with paid reservations may discover that they lose their flights and cash.
If your flight is part of a package that covers the ATOL scheme, then you must be protected and entitled to a new reservation or refund.
Otherwise, you can try to recover the money from your credit card company, if that’s how you paid. There is also a debit card chargeback scheme that can help.
Many travel insurance policies are not very useful in these situations, unless you have an extra for the option of scheduled airline failure or something similar.
Those trapped abroad could remain waiting for the government to order the CAA to intervene, as it did when Monarch and Thomas Cook sank, to bring back stranded passengers for free.
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