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After Effects: The Flybe Rescue

by Ankur Deo

Flybe has been on quite a roller-coaster recently; the airline which was on a brink of collapse was rescued by the government this week. And this has created ripples in the domestic British aviation market. While Flybe may be breathing a sigh of relief, the IAG group (owner of British Airways) and Ryan Air, among others, have demanded that the government should extend ‘tax holiday’ to other airlines too, or else, it will be in breach of competition and state aid laws.

The details of the rescue agreement between the government and Flybe have not been made public. The deal, however, is understood to be a short-term deferral of an outstanding air passenger duty (APD) tax bill of £106m, a possible loan, and the promise to review APD levels before the March 2020 budget.

FLybe_1

Image Credits: Economist

While Ryan Air’s chief Michael O’Leary wrote a strongly worded letter to the Chancellor of UK, Sajid Javid, saying ‘the state rescue of Flybe contravenes competition rules’, British Airways owner IAG has also filed a complaint with the European Union, arguing that the rescue breaches state aid rules.

Mr.O’Leary, CEO of Ryan Air, has stated:

“Unlike Flybe we all operate profitable business models (without the benefit of being owned by billionaires). We must be treated the same as Flybe if fair competition is to exist.”

This episode has an entirely different side too. While the government is being criticized by airlines, others have also criticized it stating that bailing Flybe is an act of climate vandalism. According to reports, the encouragement of aviation shall lead to nothing but more carbon emissions, which in turn shall intensify the climate emergency in the long run. While it difficult to gauge the extent of social damage caused by either more carbon emissions (when the airline is functional) or loss of nearly 2000 jobs (in case the airline would had folded), the argument still makes sense, nonetheless.

Any business environment must be fair and non-partial if market needs to flourish. Rescuing Flybe with a deal that has been kept under wraps certainly would raise some eyebrows. However, on the flip side, Flybe has avoided the unfortunate fate of airlines like Monarch and Thomas Cook (for now)!

What do you think of this deal? Let us know in the comments!

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