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British Airways parent IAG SA said it filed a complaint to the European Union after Britain backed a rescue of regional carrier Flybe, which feeds passengers onto flights at rival Virgin Atlantic Airways Ltd.
The submission to the EU competition commission says it would be unfair for the government to defer Flybe’s air passenger duty payments, according to a person familiar with the matter who asked not to be named discussing the complaint before details are public.
Britain said Tuesday the deal allowing Flybe to continue flying included a review of the APD levy, without specifying what that might entail. Support may include a state-backed loan, another person has said. Flybe parent Connect Airways, made up of Virgin, private-equity firm Cyrus Capital and airport operator Stobart Group, has in turn committed to inject funds.
The European Commission said in a statement it stands ready to discuss the compatibility of the proposed measures with EU state aid rules, and that intervention must avoid distorting competition. While Britain is set to leave the bloc at the end of this month, terms of the withdrawal agreement mean EU law will continue to apply during a transition period as if it were still a member.
Prime Minister Boris Johnson took the unusual step -- for Britain -- of intervening to save a private company as the collapse of Flybe threatened to leave some of the most economically challenged parts of the U.K. with diminished transport links. Monarch Airlines, Flybmi and Thomas Cook Group Plc all failed without state help in the past 2 1/2 years.
Flybe, the No. 1 U.K. carrier on domestic routes, was delisted in March after its purchase by Connect Airways for 2.2 million pounds ($2.9 million), with the consortium also providing 100 million pounds in further funding.
The carrier, which employs about 2,400 people, has struggled for years with the narrow margins on regional routes, where demand is lower, together with fluctuating fuel prices and uncertainty around Brexit.
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