Ryanair threatens legal action against UK Government over Flybe bailout

The UK Government is considering support for Flybe to prevent its collapse. Picture: Ian Georgeson
The UK Government is considering support for Flybe to prevent its collapse. Picture: Ian Georgeson
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Ryanair today threatened legal action against UK ministers if they fail to come clean over their support for struggling rival Flybe.

Chief executive Michael O'Leary gave the UK Government a seven-day ultimatum before launching proceedings over breaching competition laws.

He also claimed that EasyJet, British Airways and other airlines would join Ryanair in stepping in to provide flights if Flybe failed.

The move comes a day after British Airways' owner reported the UK Government to European Union competition authorities over ministers' intervention to avert Flybe's collapse.

Flybe has 54 routes in Scotland - 18 at Edinburgh, 15 at Glasgow and Aberdeen and six at Inverness.

Mr O'Leary demanded Chancellor Sajid Javid revealed what support had been given to Flybe and that a "holiday" from paying air passenger duty (APD) be extended to its competitors.

In a letter, he wrote: "Should you fail to confirm these facts within the next seven-day period, please be advised that Ryanair intends to launch proceedings against your Government for breach of UK and EU competition law, and breach of state aid rules."

READ MORE: The key questions to answer in Flybe affair – Bill Jamieson

Mr O'Leary also disputed ministers' claim that Flybe remained viable and said a bailout would be for the "sole benefit" of its "billionaire owners Delta Airlines, Sir Richard Branson and Cyrus Capital".

He said the Flybe business model was not profitable nor viable and had "lurched from failure to failure repeatedly over the last 20 years".

He said: “This Government bailout of the billionaire owned Flybe is in breach of both competition and state aid laws.

Airlines 'will step in'

"The reason why Flybe isn’t viable is because it cannot compete with lower fare services from UK regional airports on domestic and EU routes provided by Ryanair, EasyJet, BA and others, and it cannot compete with lower cost road and rail alternatives on many smaller UK domestic routes.

"If Flybe fails (as it undoubtedly will once this government subsidy ends) then Ryanair, EasyJet, BA and others will step in and provide lower fare flights from the UK regional airports, as we already have to make up for the recent failure of Thomas Cook Airways."

However, many of Flybe's non-London UK routes derive from its purchase of BA's loss-making Connect division in 2006.

It has been widely reported that Flybe has been allowed by HM Revenue and Customs (HMRC) to defer its monthly APD payments.

Meanwhile, British Airways and Aer Lingus owner International Airlines Group (IAG) has written to the Treasury, Transport and Business departments asking a series of questions over the deal.

Bosses want to know if the UK Government is a "financial guarantor" to Flybe, has a tax deferral been agreed and what reassurances have been made by the owners.

IAG said the questions, sent in a freedom of information request seen by the Press Association news agency, to which The Scotsman subscribes, are being asked "due to a lack of transparency about the Government's involvement in the rescue package for Flybe".

Ministers are asked if they have ensured Flybe's owners - Stobart, Virgin Atlantic and Cyrus Capital - have met their previous funding commitments to invest £100 million in the airline when they bought it last year.

The Government has confirmed it will review APD, but it has declined to confirm or deny that a deferral for Flybe has been agreed.

HMRC said individual and company tax affairs were "confidential", but deferrals are a common tool in avoiding company collapses.

Downing Street has insisted there has been "no state aid to Flybe" and any support that is given to the firm would be on "strictly commercial terms".

Flybe's owners have said they will invest more cash into the airline.

But only Stobart has revealed how much it has committed - up to £9 million.