The Exeter-based company Flybe has found itself on the brink of collapse less than a year after it was rescued by a consortium which included Richard Branson's Virgin Atlantic.
Flybe had sought relief from the UK Government for its existing passenger duty bill but this could amount to illegal State aid as the UK Government cannot favour a particular undertaking.
One option being considered by the UK Government is to cut air passenger duty for all airlines. This option does not give rise to a State aid issue but general taxes might need to be raised in order to make up for the lost revenue. It would also not assist Flybe with deferring payments on its existing passenger duty bill.
With the final Brexit deal still being negotiated, it is impossible to know what the UK's policy will be post-Brexit. However, the UK Government has previously indicated that it wants to maintain maximum flexibility to help struggling businesses following Brexit.
Flybe's latest difficulties could be the catalyst for a change to the State aid regime in the UK.
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