Ministers agreed to work with Flybe to figure out a repayment plan for a significant tax debt that is though to have racked up in excess of £100m. The firm’s owners have also agreed to pump more money into the airline which has lost considerable amounts in the past years.
Business Secretary Andrea Leadsom said the deal would keep the company operating.
Some eight million passengers who fly with the airline each year will be relieved at the news.
Several notable figures have criticised the decision, including the owner of British Airways, who said the decision is a misuse of public funds.
In a letter Transport Secretary Grant Shapps, Willie Walsh questioned why the taxpayer is picking up the tab for the airline’s mismanagement.
He drew attention to the fact that one of Flybe’s biggest shareholders, Virgin Atlantic, is part owned by the US’s Delta – one of the world’s largest and most profitable airlines.
Flybe services dozens of the UK’s domestic routes that aren’t flown by other airlines.
For example, the regional service to Newquay.
Without it, many smaller airports may go into disuse, though it is likely other airlines would likely pick up where Flybe left off.
Ms Leadsom tweeted: “Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that UK regions remain connected.
“This will be welcome news for Flybe’s staff, customers and creditors and we will continue the hard work to ensure a sustainable future.”
Lucien Farrell, the chairman of Connect Airways, which owns Flybe, said the group had agreed to “keep Flybe flying with additional funding alongside government initiatives”.
He said: “We are very encouraged with recent developments, especially the government’s recognition of the importance of Flybe to communities and businesses across the UK and the desire to strengthen regional connectivity.”