Row over Flybe rescue intensifies

Ryanair's chief has attacked the Chancellor over the deal

The row about a government-backed rescue package for the regional airline Flybe intensified on Tuesday with a fresh attack by Ryanair's chief executive on Sajid Javid, the chancellor.

Sky News has obtained a letter sent by Michael O'Leary accusing Mr Javid of making "inaccurate and seriously misleading" statements about Flybe's finances.

Mr O'Leary described a short-term tax deferral granted to Flybe known as a "Time to Pay" arrangement as a "breach of state aid rules" because "all of its competitor airlines in the UK continue to pay their [Air Passenger Duty] on time".

In his letter, the Ryanair boss stepped up his criticism of Flybe's owners - led by Sir Richard Branson's Virgin Atlantic - by asking Mr Javid: "If these billionaire shareholders are not willing to put their hand in their own deep pockets to bail out the loss-making Flybe, then why is your government and HMRC [the tax authorities] giving them a bail-out?"

The latest salvo from Mr O'Leary comes nearly a fortnight after he threatened to sue the government over its involvement in a financial support package aimed at Flybe, which in addition to the APD deferral includes a possible loan of more than £100m.

Sky News revealed on Monday that Whitehall had drafted in the restructuring experts Alvarez & Marsal to advise on the terms of any loan.

Sources close to Ryanair said it intended to launch legal action once it had seen full details of the deal between the government and Flybe.

International Airlines Group has also threatened to sue the government.

Mr O'Leary questioned the chancellor's assertion that Flybe was "a viable business with genuine short-term difficulties", describing it as "a business that has lurched from failure to failure over the last 20 years".

"What Flybe does consistently is lose money because it has a failed business model," Mr O'Leary wrote.

The Ryanair chief said Mr Javid had been "blindsided by these billionaires", and warned: "If the first critical business decision of your new government is to bail out a loss-making turkey like Flybe, for the sole benefit of billionaires like Richard Branson, Delta Airlines and Cyrus Capital, then your business strategy is doomed to fail."

The chief executive of Flybe has denied that negotiations between the company and the government constitute a bailout, even though at least two areas of government policy appear to be being reoriented specifically to help the carrier.

Ministers have promised to reassess the Air Passenger Duty regime in time for the Budget in March, while a review of "regional connectivity" is likely to result in more of Flybe's domestic routes being re-designated to allow them to benefit from a form of state subsidy.

Flybe, which carries 8 million passengers each year and serves 25 UK airports, averted immediate collapse by securing additional funding from its owners last week.

The initial steps towards a rescue of Flybe, which included its owners' injection of up to £50m into the business, removed the immediate threat to 2,400 jobs at the Devon-based airline.

The accountancy firm EY had been on standby to step in as administrator.

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