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UK Government Considering Tax Relief Rescue Package for Regional Airline Flybe

British regional airline Flybe currently operates 189 routes throughout the UK and Europe, and has maintained a significant hold over the UK market and non-London flights. In 2018 however, the airline put itself up for sale and purchased by a consortium looking to make the company profitable once more.

The UK government are considering offering a rescue package to the struggling British-owned regional airline Flybe, by offering tax relief of passenger duty levies.

According to Sky News, top ministers will be discussing the airlines future and whether they could delay its estimated air passenger duty bill of £106 million ($137 million) for another three years, allowing it to survive the oncoming economic turbulence. 

Shareholders would also be required as part of the deal to inject funds and secure the company.

While speaking to the BBC, Prime Minister Boris Johnson said that it wasn't the job of the state to “step in and save companies that simply run into trouble'' but that he recognised its importance to the UK economy.

"We're working very hard to do what we can, but obviously people will understand that there are limits, commercially, to what a government can do to rescue any particular firm,'' he told the BBC.

"But what we will do is ensure that we have the regional connectivity that this country needs", the Prime Minister added.

A consortium of Virgin Atlantic, Stobart Group and Cyrus Capital purchased Flybe in February 2019. The trust, known as Connect Airways, paid only 2.2 million pounds for Flybe's assets but promised to turn the airline around through a £100m cash injection and a rebranding to "Virgin Connect" in 2020.

Despite the purchase however, the company is still on the brink of collapse and has been engaged in a fraught bid for emergency funding. 

Flybe's network includes more than half of British domestic flights outside of London, largely serving airports in Aberdeen, Belfast City, Manchester and Southampton.

However in recent years it has faced problems including a run on the pound resultant from the Brexit vote, competition in its traditional regions from other budget airlines like EasyJet.

EasyJet has also plans to operate flights from Birmingham to Edinburgh, which is currently a major route for Flybe.

"Most of [Flybe’s] major competition in the UK is actually trains and buses”, Virgin Atlantic chief executive Shai Weiss told City A.M. in October, explaining that customers traveling within the UK prefer to take the train rather than flying.

Airline companies have often centred taxation as the main cause of growth restriction with passengers on domestic flights paying 26 pounds in tax for a return trip and even more with premium tickets.

If Flybe were to go under, it would be the second airline company in just 4 months to face failure with Thomas Cook going into liquidation back in September.

The airline, which according to its website has 2,400 employees could potentially put up to 2,000 jobs at risk if it were to collapse.

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