Thursday 16 January 2020 6:30 am

Flybe bailout reveals Johnson's priorities

During the election campaign, Labour claimed that a Tory victory would unleash “Thatcherism on steroids”.

Now, just weeks into the new Boris Johnson era, corporate bailouts are on the agenda. Hardly the rampant free-market dogma we were warned about.

The troubled airline Flybe has received a £100m temporary tax break, plus the promise of a review into air passenger duty, which hits the domestic carrier hard.

The airline’s owners were presented with the perfect political opportunity to make their case to government.


Ever since his election victory, Johnson has talked about infrastructure spending, regional investment and the importance of connectivity.

Flybe’s owner, Connect Airways — the consortium founded by Virgin Atlantic, Stobart Aviation and Cyrus Capital — must have viewed ministers as a soft touch.

Would they really let 2,500 jobs disappear? Would they shrug at the hit to regional airports? Not likely.

One wonders how much of a fight the government put up. It’s hard to picture the business secretary on the phone to Richard Branson, saying “you bought the damn thing, you can prop it up.”

It’s not like the billionaire couldn’t afford the bill. Besides, his own biggest shareholder is Delta — one of the most profitable carriers in the world.

Given all this, one can hardly blame Willie Walsh for reacting with fury.

Granted, his rivalry with Branson is intense and goes back decades, but he’s not wrong to point out that the government shouldn’t be in the business of bending the rules to save a failing company while viable competitors watch from the wings.


It isn’t only IAG and Easyjet complaining about the government’s apparent distortion of the market. EU competition officials will assess their complaint but elsewhere in Brussels the role of state aid and a commitment to a level playing-field are at the heart of the EU’s demands for a future UK-EU trade deal.

The European Commission’s most recent document outlining its red lines makes clear that it intends “to prevent unfair competitive advantage[s] that the UK could enjoy through undercutting of levels of protection with respect to…competition and state aid”.

The government says it’s confident their package for Flybe doesn’t fall foul of state aid rules, but even if the EU rules in their favour it’s clear that Johnson’s government isn’t squeamish about intervening to prop up failing companies.

The coming negotiations will reveal the extent to which it’s prepared to fight for its right to do it again.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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