Flybe collapse threat: as the airline circles administration, what are your rights if you've booked flights?

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The government is reportedly considering a cut to air passenger duty on domestic flights in a bid to save regional airline Flybe from collapse.

Europe's largest regional airline was locked into last ditch survival talks with the Government over potential emergency financing yesterday (13 January) after suffering rising losses.

(Photo: Getty Images)

(Photo: Getty Images)

The talks came less than a year after the airline - which operates more UK domestic flights than any other - was bailed out by a consortium led by Sir Richard Branson's Virgin Atlantic.

Flybe has been holding talks with the Department for Business, Energy and Industrial Strategy and the Department for Transport on whether the government could provide or facilitate any emergency financing to the company, according to Sky News report.

Now Chancellor Sajid Javid is to meet the departments later today (14 January) to discuss lowering the levy, a change that would allow Flybe to defer a tax bill, implement a rescue plan, and secure more than 2,000 jobs.

Here's everything you need to know about the situation:

(Photo: Shutterstock)

(Photo: Shutterstock)

What are Flybe's previous troubles?

Flybe flies 8.5 million passengers each year to 170 European destinations.

The Exeter-based firm currently operates a number of domestic routes in Britain between cities which are connected by direct trains, such as Manchester-Glasgow, Birmingham-Edinburgh, Exeter-Manchester and Exeter-London City.

Last February, Flybe was bought by a consortium led by a Virgin Atlantic following a series of poor financial results and profit warnings.

Connect Airways, which consists of Virgin Atlantic, Stobart Air and Cyrus Capital, paid £2.2m for Flybe's assets and operations.

Flybe completed the sale of its assets to the group in the deal worth only 1p per share.

What happens if the talks fail?

The future of Flybe's 2,000 staff will be put at risk if the talks fail.

Accountancy firm EY is understood to have been put on standby to handle an administration.

A spokesperson for the airline said: "Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned. We don't comment on rumour or speculation."

The two Government departments involved were similarly tight-lipped on the issue, saying only that they "do not comment on speculation or the financial affairs of private companies."

What would a collapse mean for customers?

If Flybe is unable to stitch together a rescue deal, it would be the second major airline collapse in four months, following Thomas Cook Group's implosion last September.

Following the collapse of Thomas Cook, tens of thousands of people were left facing cancelled flights and ruined holidays, with many holidaymakers wondering how they could claim back money for their trips after the package holiday firm entered liquidation.

Travellers will be hoping a similar fiasco can be avoided with Flybe, but if a rescue solution is not met and the airline does go bust, it's hard to say at this point just what that might mean for customers.

What are my rights?

No doubt Flybe flights will be cancelled as the airline ceases its operations, but receiving a refund may not be as simple as you might like.

Many of Thomas Cook's holidays came with Air Travel Organiser's Licence (ATOL) protection, a scheme which aims to protect customers flying from the UK if a travel company they have booked a trip with collapses, ensuring they do not lose money or get left stranded.

But flights bought directly from Flybe are not ATOL protected, and it's only if you have bought the holiday through a separate travel company that you may be covered.

In the event of Flybe's collapse, you'll want to check your booking to see if you were sent a certificate, which will also state who the trip is protected by.

But even if your flight is not ATOL protected, you may still be able to claim from you insurance provider, credit card issuer or bank.