The rescue of the Flybe airline has been described as “misuse of public funds” by an opponent, as environmental activists also criticized the measure.
Willie Walsh, the executive director of the owner of British Airways, attacked the government’s plan in a letter to Secretary of Transportation Grant Shapps.
The bailout differs some tax payments, which are estimated to exceed £ 100 million.
The leader of the Green Party, Caroline Lucas, attacked the government’s proposal to reduce the passenger tax.
“Before the acquisition of Flybe by the consortium that includes Virgin / Delta, Flybe advocated for taxpayers to finance their operations by subsidizing regional routes.
“Virgin / Delta now wants taxpayers to pay the bill for their mishandling of the airline,” Walsh said in his letter. “This is a flagrant misuse of public funds.”
“The precarious situation of Flybe mocks the promises that the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built.”
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Three cabinet ministers: Shapps, business secretary Andrea Leadsom and Chancellor Sajid Javid signed the agreement that will keep Flybe running.
Although the terms of direct assistance were not disclosed, it is understood that they include leniency in Flybe’s air passenger rights (APD) payments.
Airlines charge the passenger fee as part of the price of their ticket and then deliver it to HMRC.
It is understood that Flybe could receive up to three months of breathing space to pay around £ 100 million in taxes.
Ministers also agreed to review the future of £ 26 tariffs for air passengers on domestic flights in a movement attacked by environmental activists.
“Addressing Flybe’s problems by reducing APD on all domestic flights is totally incompatible with any serious commitment to address the climate crisis,” Lucas said in a tweet. “Domestic flights must be reduced, not made cheaper.”
But the government has said that the tax revision will be consistent with its zero carbon objectives.
The owners of Flybe, Virgin Atlantic, Cyrus Capital and Stobart Air, will inject around £ 20 million of new money.
Mr. Walsh’s letter notes that Virgin is part of the Delta Air Lines of the United States, which is one of the largest and most profitable airlines in the world. He argues that Virgin and Delta together have the resources to rescue Flybe, and should not be asking for taxpayer support. Walsh says that Flybe has been mismanaged.
Flybe is already receiving some public money for its important Newquay-Heathrow route, which operates under a “public service obligation” contract with the government.
The letter says that British Airways had indicated its willingness to operate that route without assistance, only in the summer, but was excluded due to the agreement with Flybe.
Walsh also warns the government that Flybe’s operations in Heathrow could be diverted in time for long-haul routes, which would not be in line with its policy of promoting regional connections to London.
Walsh has refused to comment publicly on the text of the letter, but is in line with the long history of trade battles between BA and Virgin Atlantic.
The two airlines have repeatedly faced each other over the years and remain staunch commercial rivals. Virgin is not only a major shareholder of Flybe, but the latter’s services to Heathrow provided vital food for domestic passengers from the United Kingdom to Heathrow’s long-distance services.
Other airline chiefs contacted by the BBC also condemned the government’s rescue. But Rob Griggs, policy director for Airlines UK, the industry’s trade agency, defended the deal. He said that the fact that Flybe has time to pay air passenger taxes is not the same as a direct injection of public funds.
The British Association of Airline Pilots, a union, welcomed the news.
“This is good news for 2,400 Flybe employees whose jobs are insured and for regional communities that would have lost their air connectivity without Flybe,” Secretary General Brian Strutton said in a statement.
Lucien Farrell, president of Connect Airways, owner of Flybe, said the group had agreed to “keep Flybe flying with additional funds along with government initiatives.”
“We are very encouraged by recent developments, especially the government’s recognition of the importance of Flybe for communities and businesses throughout the United Kingdom and the desire to strengthen regional connectivity,” he said.
The transportation secretary said the government had worked closely with Flybe to ensure that its planes could continue flying.
Shapps said the Department of Transportation will conduct an urgent review that will seek to assess how it can improve regional connectivity and ensure that airports continue to operate throughout the country.