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Government considers air passenger duty cut to save struggling Flybe

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Written by: Paloma Kubiak
14/01/2020
The government is considering a cut to air passenger duty (APD) in a bid to prevent Flybe going under, reports suggest.

The regional carrier, which operates more UK domestic flights than any other airline, faces an estimated APD bill of £106m, according to Sky News.

But the struggling airline may be able to defer the payment for three years as the government is reportedly considering cutting APD.

If APD is cut for Flybe, it would need to be cut for all airlines to prevent breaching EU state aid rules or UK tax law.

Passengers flying from UK airports are charged APD with the amount varying on destination and the type of cabin. Those on domestic flights pay £26 for a return journey.

The stealth tax is set to bring in £3.7bn to the Treasury for 2019/20.

Flybe, which flew eight million passengers last year, has purportedly seen losses escalate in the 10 months since it was delisted from the London stock market and acquired by a consortium led by Sir Richard Branson’s Virgin Atlantic, along with Stobart Group and Cyrus.

Sky News sources claim that accountancy firm EY has been put on standby to act as administrator for Flybe.

If the airline went bust, it would be the second UK airline to fail in four months, after Thomas Cook collapsed in September.

Given the importance of Flybe, Prime Minister Boris Johnson told the BBC that the government is “working very hard to do what we can” to save the company.

Climate campaigners have criticised any proposals which would involve cutting APD.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The notion doesn’t just dent the government’s claims to prioritise the climate, it could gouge a bit of a hole in the budget finances too.

“Air Passenger Duty has been one of the most successful stealth taxes of the past 25 years. Since launch in 1994 if it had kept up with inflation, it would have roughly doubled. Instead it’s up to 50 times higher on some flights, and it brings in ten times the tax overall. Last year it raked in £3.6bn.

“Slashing the rate could mean Sajid Javid having to try to find hundreds of millions of pounds lying around somewhere to plug the gap.

“One option would be to squeeze in a temporary cut. Unsurprisingly APD is a seasonal tax, and the tax take falls dramatically from January to March, so a short-term suspension would do far less damage to the Budget maths.”

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