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Banking & financial disputes

Flybe collapses two months after government announces rescue

Impact of coronavirus was last straw for Europe’s largest regional airline.

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With coronavirus proving to be the final straw, Flybe has gone into administration less than two months after the government announced a rescue deal, resulting in the loss of more than 2,000 jobs.

Simon de Broise comments on the airline’s struggles and the circumstances around the collapse:

“Flybe entered administration this morning after last ditch talks with the government to save the struggling airline failed. The final straw for the business appears to have been the huge negative impact that the coronavirus outbreak was having on its bookings – something that is affecting many operators across the world at the moment. 

Airlines generally have to manage on paper-thin margins at the best of times, and so any interruption to cash-flow quickly becomes a serious issue. In truth Flybe’s business has been struggling for some time. It may have been known as ‘Europe’s largest regional airline’, but having a large network has disadvantages – in particular the continuing to battle to keep it profitable at the same time as supporting loss making routes. 

Flybe was rescued last year by the Virgin and Stobart Aviation led consortium, Connect Airways, who have reportedly invested over £135m in 14 months. However, when financial strains appeared again at the beginning of the 2020, the airline turned instead to the UK government; seeking a loan and certain reliefs from air passenger duty – which Flybe claimed unfairly penalises regional airlines, who have to pay the tax twice on domestic trips. Flybe’s competitors reacted angrily to the suggestion that the UK government might consider relaxing tax rules for domestic operators,  and some airlines, including Ryanair, threatened legal action. In the event, Flybe succumbed to the effects of the coronavirus before these arguments could get off the ground.”  

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Simon de Broise

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