* Airline already struggling before coronavirus hit demand
* Accounting firm EY ready to handle administration
* Planes continuing to fly for now
* Flybe failure to hurt UK govt plans for regional
connectivity
(Adds owner comments, company and industry background)
By Sarah Young
LONDON, March 4 (Reuters) - British regional airline Flybe
is due to go into administration within hours, a source told
Reuters on Wednesday, as the already struggling carrier failed
to withstand the plunge in travel demand caused by coronavirus.
Accounting firm EY will be called in to handle the
administration, a form of creditor protection, once Flybe's
aircraft are all back on the ground from flying later on
Wednesday, said the source familiar with the situation and who
spoke on condition of anonymity.
A representative for Flybe declined to comment on the
possibility of administration or the airline's longer-term
financial situation.
Flybe's failure would put 2,000 jobs at risk and cause a
headache for Prime Minister Boris Johnson and his plan to boost
regional transport links.
Flybe would be among the first airlines to go out of
business since the emergence of coronavirus, which surfaced in
China last year and has since claimed around 3,000 lives and
sharply reduced travel demand.
Some major airlines have said they will need to cut costs to
weather the downturn in bookings, particularly since late
February when Europe's worst outbreak emerged in Italy.
British Airways, easyJet, Lufthansa
and United Airlines are amongst those
announcing cost-saving measures.
Flybe was already in financial trouble before coronavirus
hit.
The airline, which connects smaller UK cities, was rescued
from near collapse in mid-January, when shareholders agreed to
invest more money alongside UK government support for the
airline.
Flybe's current owners are Connect Airways, a consortium
created by Virgin Atlantic, Stobart Group and Cyrus
Capital. The group have invested 110 million pounds ($141.6
million) since buying Flybe in 2019.
Virgin Atlantic declined to comment on Wednesday, while
Stobart and Cyrus were not immediately available.
UP IN THE AIR
Flybe had been pinning hopes for survival on a government
loan plus a reduction in air passenger duty, a tax charged by
Britain on flights, but help did not come in time, meaning that
its regional routes in Britain are now at risk.
PM Johnson said in January that Flybe was important for
Britain's transport links and that the government would do what
it could to help the carrier.
His government has a plan to try to boost regions of Britain
beyond London. Without Flybe though, some regional airports like
Exeter, Birmingham and Southampton will have much poorer
connections within Britain and to Europe.
Flybe's network of routes includes more than half of UK
domestic flights outside London. It has 68 aircraft and carries
8 million passengers a year between 71 airports in the UK and
Europe.
($1 = 0.7770 pound)
(Reporting by Sarah Young in London
Editing by David Milliken and Matthew Lewis)