Flybe: Ryanair's Michael O'Leary threatens legal action over rescue

The boss of Ryanair has threatened legal action over the government help given to regional carrier Flybe.

Michael O'Leary has written a strongly-worded letter to the Chancellor, Sajid Javid, saying the state rescue of Flybe contravenes competition rules.

He argues measures that are being put in place to help Flybe should be extended to other airlines.

If they are not, Ryanair intends to launch legal proceedings against the government, Mr O'Leary said.

British Airways' owner IAG has already filed a complaint with the EU, arguing the rescue breaches state aid rules.

Earlier this week, the government approved help for Flybe, which is thought to centre on giving the airline extra time to pay about £100m of outstanding Air Passenger Duty (APD).

Details of the rescue plan have not been made public, however the government has said it is fully compliant with state aid rules.

Mr O'Leary's letter describes the rescue as a "badly thought-out bailout of a chronically loss-making airline" and calls for any tax holiday granted to Flybe to be extended to rival operators.

"Unlike Flybe we all operate profitable business models (without the benefit of being owned by billionaires)" the letter says "We must be treated the same as Flybe if fair competition is to exist."

Flybe's owners include Richard Branson's Virgin Atlantic, Stobart Group and Cyrus Capital who have agreed to invest £30m into the airline.

Stobart Group said it will provide £9m of capital "with the funds drawn down only if required".

HMRC has indicated in a tweet that what is being described as a "tax holiday" for Flybe is available to other businesses that run into trouble.

"Time to Pay agreements are common where taxes or duties are owed," it said. HMRC said last year more than 700,000 such arrangements were used.

Ryanair's letter said that the government should clarify what support is being given to Flybe including details of any "APD holiday".

"Should you fail to confirm these facts within the next seven-day period, please be advised that Ryanair intends to launch proceedings against your government for breach of UK and EU competition law and breach state aid rules," the letter said.

IAG has also written to the government accusing it of a "lack of transparency" and has submitted a Freedom of Information request over the details of the rescue.

The government has said it will review APD as part of a government commitment to improving regional connectivity across the UK. It intends to make a further announcement at the Budget in March.

A rail industry body and environmental lobby groups have voiced concern that cutting taxes on flying provided the wrong incentives at a time when the government is also aiming to cut carbon emissions in order to tackle the climate crisis.

The Department for Transport said the outcome would "benefit the entire industry".