Sajid Javid to reject Ryanair legal threat over Flybe 'bailout'
The chancellor will tell Michael O'Leary that government assistance for Flybe does not constitute state aid, Sky News understands.
Friday 24 January 2020 10:50, UK
Sajid Javid will on Friday seek to dismiss the threat of legal action against the government over its role in the rescue of Flybe, the regional airline.
Sky News has learned that the chancellor is expected to write to Michael O'Leary, Ryanair's chief executive, to say that a package of measures unveiled last week to support the Exeter-based company did not constitute state aid.
People close to the situation said on Thursday night that Mr Javid was likely to allude to Flybe's description of a tax deferral deal it had reached as "a standard 'time to pay' arrangement".
While he may not directly refer to Mr O'Leary's legal threat, one person said the tone of the chancellor's response would be "unequivocal".
Treasury officials are understood to be frustrated at the perception that the government had orchestrated a "bailout" of Flybe, even though they concede that a state loan to the company - albeit on commercial terms - may eventually form part of an aid package.
Ministers have promised to reassess the Air Passenger Duty regime in time for the Budget in March.
A separate review of 'regional connectivity' is likely to result in more of Flybe's domestic routes being redesignated to allow them to benefit from a form of state subsidy.
The chancellor's letter to Mr O'Leary will come just over a week after Flybe, which carries 8m passengers each year and serves 25 UK airports, averted immediate collapse by securing additional funding.
Flybe is owned by Connect Airways, a consortium whose shareholders are Sir Richard Branson's Virgin Atlantic, Stobart Group and Cyrus Capital Partners.
Mr O'Leary wrote to Mr Javid on January 16 warning that unless he clarified details of government assistance to Flybe within seven days, Ryanair would take legal action against it "for breach of UK and EU competition law, and breach of State Aid rules".
British Airways' owner, International Airlines Group, has also signalled its intention to challenge the government through the courts.
The initial discussions between Flybe and ministers, revealed by Sky News at the beginning of last week, included a substantially longer tax holiday.
The deal reached on 14 January also necessitated the injection of tens of millions of pounds by Connect Airways' owners.
Flybe's rescue removed the immediate threat to 2,400 jobs at the Devon-based airline, even as the accountancy firm EY had been preparing to step in as administrator.
Last week's announcement issued by the Treasury made no reference to the tax-related assistance to Flybe.
Mr Javid said: "I welcome Flybe's confirmation that they will continue to operate as normal, safeguarding jobs in UK [sic] and ensuring flights continue to serve communities across the whole of the UK.
"The reviews we are announcing today will help level up our economy.
"They will ensure that regional connections not only continue but flourish in the years to come - so that every nation and region can fulfil its potential."
The Treasury declined to comment on Thursday.