UPDATE 4-British regional airline Flybe collapses after coronavirus blow

* Airline struggling before coronavirus hit demand

* Accounting firm EY to handle administration

* Could hurt government plans for regional connectivity
(Adds industry details, reaction)

By Sarah Young

LONDON, March 5 (Reuters) - British regional airline Flybe
collapsed on Thursday after a plunge in travel demand, making
the struggling carrier the industry's first big casualty of the
coronavirus outbreak.

The failure of an airline that connects all corners of the
United Kingdom with major European destinations not only puts
around 2,400 jobs at risk but could also see some airports
struggle and business travel restricted.

"All flights have been grounded and the UK business has
ceased trading with immediate effect," Flybe said after the
government walked away from a rescue package agreed in January.

Flybe's collapse also causes a problem for Prime Minister
Boris Johnson who had promised to "level up" Britain by
investing in regional transport links.

The operator, described as the largest independent regional
airline in Europe, carried around 8 million passengers a year
between 81 airports and was owned by a consortium of Virgin
Atlantic, Stobart Group and Cyrus Capital.

It becomes the first major airline to go out of business
since the emergence of coronavirus, which surfaced in China last
year and has since claimed around 3,000 lives.

Airlines are racing to cut costs by cancelling flights to
weather a downturn that has worsened 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.

FINANCIAL TROUBLE

Flybe was already in financial trouble and was rescued in
mid-January, when shareholders agreed to invest more money
alongside government support that was due to include a potential
loan and a review of local flight taxes.

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.

A government spokesman said on Thursday it was working
closely with the industry to reduce any disruption its routes.

"Flybe's financial difficulties were longstanding and well
documented and pre-date the outbreak of COVID-19," the
government said in a statement.

Johnson's 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, served by its 68 aircraft,
includes more than half of UK domestic flights outside London.

The pilot's union said airline staff had been betrayed.

Stobart and Virgin Atlantic said they were deeply
disappointed that Flybe had been unable to secure a viable
future. They said the outbreak of coronavirus meant the
consortium could no longer commit to financial support.
($1 = 0.7770 pound)
(Writing by Sarah Young and Kate Holton in London, additional
reporting by Rama Venkat in Bengaluru; Editing by Subhranshu
Sahu and Alexander Smith)