(Alliance News) - Ryanair Holdings PLC on Thursday warned that the tax exemption given by the UK government to "billionaire owned" rival Flybe will be in breach of competition and state aid rules unless the government extends the same to other airline operators.
Flybe, which earlier this week was on the verge of collapse, received a reprieve late Tuesday, after the UK government told the airline it would review air passenger duty. Flybe shareholders agreed to inject extra capital into the airline on the basis of the tax exemption.
Air passenger duty is a levy imposed on passenger flights from the UK.
Flybe is owned by Connect Airways, a joint venture between Stobart Group Ltd, Virgin Atlantic and investment adviser Cyrus Capital Partners. Stobart separately on Thursday said it would provide an extra GBP9 million in short term funding to Connect Airways.
In a letter to UK Chancellor Sajid Javid, Ryanair asked the government to extend the the air passenger duty "holiday" given to Flybe to all of its UK airline competitors including Ryanair, easyJet PLC and British Airways, owned by International Consolidated Airlines Group SA.
The company warned that failure to extend the tax exemption would mean that the UK government subsidy to Flybe would be in breach of competition and state aid rules.
Ryanair, in its letter, claimed that Flybe's business model was neither "profitable" nor "viable" and that it is owned by "billionaires including Richard Branson, Delta Airlines and Cyrus Capital," who do not need a government subsidy to prop up their "failed airline investments".
Ryanair Chief Executive Michael O'Leary said in the letter: "The reason why Flybe isn't viable is because it cannot compete with lower fare services from UK regional airports on domestic and EU routes provided by Ryanair, Easyjet, BA and others; and it cannot compete with lower cost road and rail alternatives on many smaller UK domestic routes. If Flybe fails, as it undoubtedly will once this government subsidy ends, then Ryanair, Easyjet, BA and others will step in and provide lower fare flights from the UK regional airports, as we already have to make up for the recent failure of Thomas Cook Airways."
"This Flybe 'subsidy' cannot comply with Competition, or State Aid rules unless the same APD eco tax holiday and other government subsidies are extended to all other UK competitor airlines including Ryanair, Easyjet, BA among others," O'Leary added.
Dublin-based Ryanair's intervention follows that of Willie Walsh, chief executive of British Airways owner IAG. On Wednesday, Walsh described the UK government's tax exemption to Flybe as a "blatant misuse of public cash". IAG has filed a complaint with the European Union over the UK government's decision to rescue Flybe.
IAG's complaint argues that the government is propping up "feeder flights" that benefit Virgin and Delta.
Ryanair shares were up 0.7% at EUR15.70 in London on Thursday afternoon. IAG shares were down 0.8% at 638.40p, while easyJet traded 1.7% lower at 1,474.50p. Stobart Group was up 1.1% at 111.43p.
By Tapan Panchal; tapanpanchal@alliancenews.com
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