The government is set to hold talks with struggling regional airline Flybe this week over proposals for a potential loan.
Whitehall officials are expected to meet with the airline and its shareholders as soon as tomorrow to discuss a potential £100m in government support, Sky News reported.
One scenario for the proposed deal could see the government loan rank more highly than existing investors, which shareholders have previously suggested they would reject.
Another option would give taxpayers security over some of Flybe’s unencumbered assets.
A third proposal, which would convert the government funding into equity, is reportedly “significantly
If no deal is secured by March, the future of the airline would be at risk, Sky News reported.
A spokesperson for Flybe said: “Flybe and its shareholders are making good progress towards securing a financial package for the business that will secure its long-term future success.
“We continue to have productive discussions with the government over their financial and fiscal support for the business as well as the UK’s regional air travel sector as a whole.
“Ahead of finalising this agreement, the airline is being supported by its shareholders and leading suppliers, is managing its cash position carefully and currently has strong liquidity.
“We are pleased to say that our bookings have returned to normal levels and we are grateful for the confidence that our customers, suppliers, airport partners and the CAA have shown in us.”
This week’s talks are reportedly an important step towards securing the terms of any government loan, however the upcoming minsterial reshuffle could delay proceedings.
The government has already agreed to measures to aid the struggling business, including a reduction in air passenger duty.
However, state intervention has proved unpopular among the budget airline’s rivals. Willie Walsh, chief executive of British Airways (BA) owner IAG, said the step was a “blatant misuse of public funds”.
BA today launched flights between London Heathrow and Newquay after Flybe ditched the loss-making route.