* PM says government working hard to do what it can
* Officials to meet later on possible domestic flight tax
cut
* Flybe flights operating as normal for now
(Recasts with PM comments)
By Sarah Young
LONDON, Jan 14 (Reuters) - Stricken regional airline Flybe
is important for Britain's transport links and the government
will do what it can to help the company, Prime Minister Boris
Johnson said on Tuesday ahead of a government meeting that could
decide the airline's future.
With Flybe's finances at breaking point, government
officials will meet later to discuss potentially cutting air
passenger taxes on all domestic flights to help rescue it.
"It is not for government to step in and save companies that
simply run into trouble, but be in no doubt that we see the
importance of Flybe in delivering connectivity across the whole
United Kingdom," Johnson told BBC television.
"We're working very hard to do what we can."
Flybe's flights appeared to be operating as normal on
Tuesday, a day after news reports emerged suggesting it needed
to raise new funds quickly to help it survive through the winter
when demand for travel is lower.
Talks between Britain's finance department and Department
for Transport (DfT) could lead to a cut to air passenger duty
(APD) and a possible deal to allow Flybe to defer a payment of
more than 100 million pounds ($130 million) for three years,
according to Sky News.
Under the plan, Flybe's owners, a group which includes
Virgin Atlantic and which themselves rescued Flybe financially
last year, would be required to invest tens of millions of
pounds of new equity as a condition of any deal.
CONNECTIVITY PROMISE
Rumours about the possible demise of Flybe have heaped
pressure on Johnson's newly elected government. In December, his
Conservative party won seats across regions served by Flybe,
helped by a promise to improve connectivity outside London.
Flybe's network of routes include more than half of UK
domestic flights outside London. Based in Exeter, south west
England, it carries eight million passengers a year between 71
airports in the UK and Europe.
The aviation industry has long opposed APD, a tax of at
least 13 pounds ($17) levied on passengers departing from UK
airports.
Flybe has said its business is disproportionately harmed by
the tax as it makes its flights more expensive versus its rail
and road competitors, because passengers travelling on return
flights within the UK will pay it twice.
The DfT and Flybe declined to comment on the talks, while
the finance department could not immediately be reached for
comment.
Should the government cut APD for domestic UK flights, other
airlines such as easyJet and British Airways,
which fly routes such as London to Edinburgh, would also
benefit.
Flybe has 68 aircraft and about 2,000 staff and was already
struggling financially when it was bought last year by Connect
Airways, a consortium created by Virgin Atlantic, Stobart Group
and investment adviser Cyrus Capital.
It has suffered as the fuel price has risen in recent
months, and news stories about its demise could cause a cash
flow squeeze as potential customers stop booking.
Should Flybe collapse, it would be the second high-profile
failure in Britain's travel industry in less than six months
after Thomas Cook went into liquidation last September,
stranding thousands of passengers.
($1 = 0.7699 pounds)
(Reporting by Sarah Young; editing by Kate Holton and Mark
Potter)
