Flybe is in talks with the government to defer the payment of air passenger duty amid reports the airline is attempting to secure a rescue deal.
The government has confirmed that delaying that bill is just one option that is being discussed with the regional airline.
However, the BBC understands that the government is reluctant to go down this route.
Flybe said: “We don’t comment on rumour or speculation.
It added: “Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned.”
Sky News reports that Flybe’s owner, Connect Airways, has been in talks with the government since the weekend to keep the struggling airline operating.
Flybe is a long-time critic of air passenger duty which it said disproportionately burdens its domestic customers because they have to pay £13 each time they take off from a UK airport.
The airline carries about eight million passengers a year from airports such as Southampton, Cardiff and Aberdeen, to the UK and Europe.
Its network of routes includes more than half of UK domestic flights outside London.
A group of local councils in Devon, where Flybe is headquartered, said: “We are aware that certain aspects of national policy, notably the air passenger duty regime in relation to domestic flights, has a significant impact on the company’s business model.”
However, it is thought deferring that duty is not the government’s preferred option.
Last year, the government refused a request from Thomas Cook for £150m in emergency funding.
Prime Minister Boris Johnson claimed it would have provided a “moral hazard” – a dangerous precedent that would see the government called on to rescue other failing private companies.
However, government sources conceded that the Conservative manifesto promises to improve regional connectivity would be dealt a severe blow if Flybe went bust.
More than 2,000 jobs are at risk if Flybe fails to strike a deal to secure funding.
The BBC understands that EY has been lined up as administrators if Flybe were to go under.
It came close to collapse a year ago but was rescued by a consortium led by Virgin Atlantic which paid £2.8m for the airline.
Along with Stobart Group, which owns Southend Airport, and hedge fund Cyrus Capital Partners, the consortium has invested tens of millions of pounds in the troubled carrier, but losses have continued to mount.
As long as Flybe carries on flying, there is no need to worry and certainly no reason to try to get your money back, writes Simon Gompertz, BBC personal finance correspondent.
If the airline was to fail, however, all flights would most likely be cancelled. Those with paid-for bookings could find they lose their flights and their cash.
If your flight is part of a package deal covered by the ATOL scheme, then you should be protected and have the right to a re-booking or refund.
Otherwise you can try to retrieve the money from your credit card company, if that’s how you paid. There is also a debit card chargeback scheme which can help.
Many travel insurance policies are not much use in these situations, unless you stumped up extra for the Scheduled Airline Failure option or something similar.
Those stuck overseas might be left hoping that the government will direct the CAA to step in, as it did when Monarch and Thomas Cook went under, to bring back stranded passengers for free.
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