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Flybe has hit out at reports the regional airline received a payment holiday of up to £100m from the state. It has agreed a payment plan with HM Revenue and Customs (HMRC) for “less than £10m” it said.

It said the arrangement would be for a “matter of months” before the tax and duties are paid off. The airline defended the move as “a standard Time to Pay arrangement with HMRC that any business in financial difficulties may use”.

The government’s support is thought to centre on giving the airline extra time to pay outstanding Air Passenger Duty (APD).

Flybe’s owners Richard Branson’s Virgin Atlantic, Stobart Group and Cyrus Capital have agreed to invest £30m into the airline.

Rival airline bosses have said the tax holiday is unfair, and either Flybe’s owners should invest more money, or it should be allowed to fail. Ryanair boss Michael O’Leary said he would sue the government if more details of the deal were not revealed.

In a letter to the chancellor, Mr O’Leary said: “Should you fail to confirm these facts within the next seven-day period, please be advised that Ryanair intends to launch proceedings against your Government for breach of UK and EU competition law, and breach of state aid rules.”

He also questioned Flybe’s logic that it didn’t constitute a bailout. “No commercial bank would lend money to Flybe, its own billionaire shareholders won’t lend them money,” he told the Today Programme.

“So the Government is stepping in here, lending them APD (air passenger duty), which is unfair on all the other UK airlines.”

Separately, Bloomberg News reported that the government may directly subsidise more routes the airline operates. It already receives a subsidy for the Newquay-to-London route.

On Thursday, the firm confirmed the airline is in talks with the government over a loan, but chief executive Mark Anderson said the financial support did not constitute a bailout.

Mark Anderson told Flybe staff the firm had had a few “difficult days” this week but it still had “a great future”.

He said the company’s turnaround plan had started to work and that with more time it would be making a big profit.

Rival airlines have called for more details of the government’s role in helping Flybe to be made public. They argue that support for the troubled regional carrier may contravene competition rules.

 

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