Flybe, the regional airline based in the United Kingdom, has hit another bump in the road to improve its financial position. The $128 million (£100 million) loan would not be granted by the British government.

The loan was part of the rescue package, which also included cuts to the Air Passenger Duty (APD) tax and deferring payments of the said APD, announced in January 2020. Several high-profile airline executives, including International Airlines Group’s (IAG) Willie Walsh and Ryanair Group executive Michael O’Leary, publicly criticized the move, describing it as a “billionaire bailout” and a “blatant misuse of public funds.”

With the British Government stepping in to save Flybe, airline executives are not happy with the move. Ryanair's own Michael O'Leary publicly expressed his concerns regarding the Flybe rescue plan in an aggressive letter to the British lawmakers.

Meanwhile, Connect Airways CEO Mark Anderson warned British lawmakers that if Flybe would collapse, regional connectivity within the United Kingdom would potentially be lost, as “only a small number of our routes are likely to be taken up by another carrier,” with reduced frequencies, said Anderson.

“If APD is halved for domestic flights it would make all the difference to the company’s survival,” stated a person familiar with the matter, reports Financial Times.

Earlier reports also indicated that Flybe has enough capital to operate until the end of March 2020. Its survival after the month relies on the reduction of the APD, which potentially indicates that the Connect Airways consortium is ready to inject capital to keep the airline running. However, seemingly the tax is detrimental to their interest to do so.

Interesting developments concluded this week, as Flybe was on the brink of collapse. Curiously, though, with the backing of Virgin Atlantic-led consortium, this should not have happened. So, why did it and why was Flybe saved by the British government?