Flybe collapse: Virgin Atlantic refused to put more cash into beleaguered airline
Virgin Atlantic refused to put any more money into collapsed regional airline Flybe due to the effect of the coronavirus outbreak on its own bookings.
In a witness statement filed by Mark Anderson, chief executive of Flybe owner Connect Airways, first reported by Sky News, Virgin Atlantic had told the airline on Tuesday evening that it was “no longer in a position to provide further funding” due to the Covid-19 impact.
According to the filing, Flybe had itself suffered booking declines of 30 to 40 per cent as a result of the coronavirus threat.
The filing, which City PM has seen, also said that Stobart had already indicated that it was unwilling to participate in any further funding.
It also revealed that since the airline had issued a profit warning in October 2018, credit card firms had piled up nearly £50m in held-back cash, which “had a material impact on [Flybe’s] liquidity”.
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When it went bust last night, Flybe only had £5.7m available in cash, and owed its creditors £10m, which had to be paid by 6 March.
The firm had also explored the option of a “pre-packaged administration sale of part of the airline business” to Cyrus Capital, one of the three firms which collectively owned Flybe.
However, due to the time it would have taken for the firm to obtain an air operator’s license, it was decided that the option was not worth pursuing.
Anderson said that the firm had also reached out to Alok Sharma, business secretary, and Grant Shapps, the transport secretary, to see if the government would provide funding.
It said that due to fears over the reaction of Flybe’s competitors, who had complained that the £100m loan might constitute unlawful state aid, the government was “reluctant to offer” the funding.
In January HMRC had reduced the amount of unpaid passenger duty that it was owed by Flybe from £5.8m to £3.8m.