UK regional carrier Flybe ceased flying on Wednesday after its owners, including Virgin Atlantic, declined to provide further funding following a slump in demand due to the coronavirus.
Flybe went into administration with parent consortium Connect Airways saying the carrier “has been unable to overcome significant funding challenges”.
This has been “compounded by the outbreak of the coronavirus which in the last few days resulted in a significant impact on demand”.
The airline collapsed with payments totalling more than £10 million due to creditors at the end of this week and only £5.7 million in funds, and its owners declined to cover the shortfall.
Connect Airways chief executive Mark Anderson revealed in a witness statement to the UK insolvency court that Virgin Atlantic decided this week it would not provide further funding.
The Financial Times reported on the submission to the court which revealed Flybe had suffered a 30%-40% fall in bookings since February 26.
Virgin Atlantic itself announced a series of cost-cutting measures on Thursday following “a fall in customer demand for travel”.
The UK long-haul carrier, which is 49%-owned by Delta Air Lines, acquired a 30% stake in Flybe just over a year ago as part of the Connect Airways consortium with Cyrus Capital (40%) and Stobart Group (30%) which took over the airline.
Flybe was on the verge of collapse at the time of the takeover and was close to collapse again this January when Connect Airways agreed a rescue deal with the UK government
The owners, including Virgin, pledged to put in fresh funds in return for government promises to review the UK’s Air Passenger Duty (APD) on domestic flights and temporarily delay collection of outstanding APD as well as to consider a loan of up to £100 million.
Rival airlines condemned the consideration of a loan and British Airways’ parent IAG and Ryanair raised legal objections.
The government subsequently appears to have gone cold on the idea, having concluded it would breach EU state aid rules which remain in force at least until the end of the year.
Following Flybe’s collapse, new aviation minister Kelly Tolhurst said: “Unfortunately, in a competitive market, companies do fail and it’s not the role of government to prop them up.”
An unidentified source close to the government-Flybe talks told the Financial Times: “We went from the government phoning us to them not answering the phone.”