Flybe Says UK Tax Holiday "Will Only Last A Matter Of Months"

(Alliance News) - Airline Flybe, which earlier this week struck a deal with the UK government to stave off collapse, on Thursday said its tax break agreement will only be temporary and it will pay roughly GBP10 million worth of levies in full.

Flybe, which is owned by Connect Airways, a joint venture among Stobart Group Ltd, Virgin Atlantic and investment adviser Cyrus Capital Partners, said the reprieve from HMRC "will only last a matter of months, before all taxes and duties are paid in full".

Flybe explained: "A payment plan was agreed with HMRC for a debt of less than GBP10 million.

"This is a standard time to pay arrangement with HMRC that any business in financial difficulties may use."

Also on Thursday, Ryanair Holdings PLC had warned that the tax exemption given by the UK government to "billionaire owned" Flybe will be in breach of competition and state aid rules unless the government extends the same to other airline operators.

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.

Air passenger duty is a levy imposed on passenger flights from the UK.

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."

Stobart separately on Thursday said it would provide an extra GBP9 million in short-term funding to Connect Airways.

Stobart shares were up 0.7% at 110.80 pence Friday morning. Ryanair shares were up 0.8% at EUR15.85.

By Eric Cunha; ericcunha@alliancenews.com

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