Tuesday 14 January 2020 12:33 pm

Ministers 'considering rescue loan' for struggling airline Flybe

The government is considering a rescue package for Flybe that could include a short term loan which falls within state aid rules, according to reports.

The BBC reported the loan would come from a pot of government money which is available to firms which does not breach state aid rules.

Nissan was reportedly encouraged to access the funding when it decided it would build new models at its Sunderland plant.

Discussions with Flybe will continue this afternoon. If a solution is reached, it would likely require the current owners, a consortium made up of Virgin Atlantic, Cyrus Capital Partners and Stobart Group, to invest tens of millions of extra cash.

Any loan would likely be paired with an industry-wide package to be announced in the upcoming March Budget that would include cutting Air Passenger Duty on domestic routes.

This would come with some environmental measures to make up for the tax cut, which climate activists have argued will be damaging to the environment, because it makes domestic flights cheaper.

Flybe, which handles half of the UK’s domestic flights outside of London, is facing mounting losses, and has suffered from weaker-than-usual demand over the winter months across the aviation industry.

Flybe has also taken a serious hit from the falling value of the pound since the 2016 Brexit referendum. This is because a high proportion of its costs are in dollars, while most of its earnings are in sterling.

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Similarly, the period of uncertainty that has struck the travel industry since the referendum has softened demand for travel in recent years. 

Moreover, Flybe’s competitors have pushed it to the side in many of its traditional strongholds. It has already suffered in Bristol, where Easyjet has established itself as the major presence flying to Belfast, Edinburgh and Glasgow.