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Flybe rescue deal agreed

Investors stump up cash. Passenger tax may be deferred.

Business secretary Andrea Leadsom said the government had reached an agreement to keep troubled airline Flybe operating.

Ms Leadsom said that the decision would be "welcome news" for staff, customers, and creditors - after 48 hours of uncertainty during which it sought to stave off collapse.

Sky News understands that the deal was likely to involve some deferral of air passenger duty for Flybe.

There would also be a review, in March's Budget, of the way the tax is applied to domestic talks - plus further talks about a government loan, and an investor cash injection for Flybe.

Ms Leadsom said on Twitter: "Delighted that we have reached agreement with Flybe's shareholders to keep the company operating, ensuring that UK regions remain connected.

"This will be welcome news for Flybe's staff, customers and creditors and we will continue the hard work to ensure a sustainable future."

Transport secretary Grant Shapps also welcomed the announcement.

He said: "Delighted we've been able to work closely with Flybe to ensure Europe's largest regional airline is able to continue connecting communities across Britain."

Mr Shapps added that the Department for Transport would launch an "urgent review into how we can level up the country by strengthening regional connectivity".

The agreement comes after Sky News revealed ministers were holding talks on whether to back a proposal for the government to defer Flybe's air passenger duty bill of £106m for three years.

That was designed to provide the airline, which carries eight million passengers annually, with the working capital it requires to survive the tough winter months and implement a turnaround plan drawn up last year when it was bought by a Virgin Atlantic-led consortium.

Virgin, together with Stobart Group and Cyrus Capital Partners, took control of Flybe's assets last March.

They were understood earlier to have resolved in principle to commit the capital being sought by the government as a condition of a rescue deal.

Sources told Sky News that Flybe's losses had escalated in the 10 months since it was delisted from the London stock market and acquired by the consortium.

The British Airline Pilots' Association (Balpa) said: "This is good news for 2,400 Flybe staff whose jobs are secured and regional communities who would have lost their air connectivity without Flybe."

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