International Airlines Group (IAG) (IAG), the parent company of such airlines as British Airways and Iberia, filed a complaint with the European Union regarding the British Government’s intervention to help the ailing Flybe. With Flybe struggling to stay afloat once again, the Government stepped in to help the regional carrier after it reached an agreement with the airline’s shareholders to keep the company flying.
However, IAG did not take too lightly to the developments, considering it crosses their direct interests. Flybe is currently owned by Connect Airways, a consortium that involves Virgin Atlantic – an airline that is currently on a quest to undermine British Airways’ positions in the United Kingdom and become a true flag carrier.
According to a press release by Her Majesty’s Treasury, the Government will take a look at the Air Passenger Duty tax, which taxes passengers departing from British airports $16.9 (£13). Since Flybe mostly flies domestic routes, passengers on their return flights pay the tax once again. Reports also indicate that the British rule makers are looking to defer a tax bill amounting to $130 million (£100 million) for up to three years, allowing Flybe to sort its operations out and continue running in the long-term.
Connect Airways Chairman, Lucien Farrell, noted that the Governmental desire to improve regional connectivity has prompted the shareholder consortium of Connect Airways “to keep Flybe flying with additional funding alongside Government initiatives.”
European Union State Aid rules, which are designed to prevent from companies to gain an unfair advantage over its competitors, state that measures by the local government (grants, interest and tax reliefs, guarantees, government holdings of all or part of a company, or providing goods and services on preferential terms, etc.) cannot give a specific company or industry sector an unfair advantage over its competition.
“Aid measures can only be implemented after approval by the Commission. Moreover, the Commission has the power to recover incompatible State aid,” states the European Commission’s site regarding State Aid control.
United Kingdom is set to leave the European Union on January 31, 2020.