Flybe collapses, despite huge investment by its…

Flybe collapses, despite huge investment by its owners – it is not getting more UK government cash
2020-03-05 08:25:00
UK airline Flybe has collapsed into bankruptcy after months of talks with the government failed to secure a £100m loan.  All flights have been cancelled. It was financially very weak, and the outbreak of Coronavirus hit its demand hard, speeding its demise. About 2,000 staff jobs are at risk.  The government had rejected the idea of a state loan to the airline. Flybe had been told there might be a cut in Air Passenger Duty on domestic flights, but that would not happen fast enough to save the failing airline. Flybe was taken over  in 2019 by “Connect Airways”— a consortium of Virgin Atlantic, Stobart Air and hedge fund Cyrus Capital – to prevent it falling into administration. Connect agreed in January to invest £30m into Flybe to continue operations, as part of a government rescue package that included APD cuts. Virgin Atlantic had invested over £135 million in Flybe to try to keep it going; that includes about £25m of the £30m committed in January 2020, alongside a “time to pay” arrangement with the Treasury on air passenger duty of £3.8m.  Flybe’s administration follows last year’s failure of Thomas Cook, which also went bankrupt. Unless other airlines take up the Flybe routes, demand at many UK regional airports (eg. Southampton, Exeter, Newquay) will be hugely reduced. .Tweet     Flybe: airline collapses two months after government announces rescue Impact of coronavirus on flight bookings proves final straw for Europe’s largest regional airline By Gwyn Topham Transport correspondent (Guardian)  @GwynTopham Thu 5 Mar 2020 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. The UK Civil Aviation Authority announced early on Thursday morning that the airline had entered administration. It said all flights were cancelled and urged passengers not to go to airports. In a statement, the chief executive, Mark Anderson, said the company had made “every possible attempt” to avoid collapse but had been “unable to overcome significant funding challenges”. Anderson said: “The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.” Flybe’s administrator, the accountancy firm EY, referred to coronavirus in its statement as it flagged “added pressures” on the travel industry in the last few weeks that made its precarious financial situation worse. Before the viral outbreak, Flybe was already struggling with rising fuel costs – a key factor in any airline’s ability to make a profit – soft demand and competition. The transport secretary, Grant Shapps, tweeted it was “very sad” Flybe had gone out of business after serving passengers for four decades. He said the government was “urgently working” with the airline industry to “identify how key routes can be re-established by other airlines as soon as possible”. Flybe’s bankruptcy has come only 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 the 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. About 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 about £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 because of 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. The government has been unwilling to bail out Flybe, despite calls from unions and MPs in the regions, with other airlines, led by the 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 monthsafter the collapse of Thomas Cook last September. Unite’s national officer for aviation, 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”. He said: “The UK economy is highly dependent on a viable and supported regional airline and airport network. 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, the shadow transport secretary, said the loss of Flybe would cause “real anxiety” throughout the country. https://www.theguardian.com/business/2020/mar/05/flybe-collapses-two-months-after-government-announces-rescue . See also Southampton, Exeter and Newquay are the main regional ai

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