Flybe on the brink of bankruptcy after coronavirus hits demand – report
Flybe could collapse into bankruptcy tonight as coronavirus outbreak saw a slump in demand at the regional carrier, which is reportedly in last ditch rescue talks with the government.
Earlier the Financial Times reported that Flybe was set to miss out on a £100m loan from the government, meaning that the embattled regional carrier’s survival may hinge on whether next week’s Budget includes a cut to air passenger duty (APD).
However, the firm now fears that even that would not be enough, with any relief from the APD cut only set to kick in 2021, by which time it would be too late, the FT said.
Due to the slump in bookings as spooked customers avoid flying over fears of catching the disease, it is now unclear whether the firm has enough cash to make it through to 11 March’s budget.
An announcement is expected within the next 48 hours, with 9pm being mooted as the earliest possible time.
It was reported that the airline’s request for the loan, which was part of a rescue package, did not meet the government’s criteria.
The possible loan was a crucial part of a UK government package it agreed to help rescue Flybe under Prime Minister Boris Johnson.
Flybe was the subject of a Virgin Atlantic-led takeover last year. And the consortium plugged £30m into the struggling airline to keep it flying.
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However, Flybe only has enough financial firepower to keep it running until the end of March, the FT said.
The regional airline carries more than 9m passengers annually and takes care of nearly 40 per cent of all domestic UK flights.
A decision on the loan had been expected in early February but has been delayed, with a decision now expected around next week’s Budget.
Flybe has argued that it is more exposed than other carriers to air passenger duty because it only operates domestically, meaning it pays £13 each way, rather than just for one of two flights.
However, high-profile airline bosses Willie Walsh and Michael O’Leary have both slammed the proposed reduction for the carrier, with Walsh, the boss of British Airways-owner IAG, calling the step a “blatant misuse of public funds”.
Budget carrier Ryanair’s boss O’Leary said that the decision to defer Flybe’s air passenger duty tax was a result of being “blindsided” by the regional airline’s billionaire owners.
Flybe and the government declined to comment.
More to follow.