HM Insights

Flybe fallout: will State Aid issues take off as we prepare to leave Europe?

According to very recent news reports, IAG (the owner of British Airways) has complained to the European Commission that the "bail out" given to Flybe breaches State Aid rules.

It is not yet clear exactly what benefits have been afforded by the UK Government to Flybe but there is speculation that it includes the deferral of a tax bill for airport passenger tax; and possibly a loan.

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What is State Aid?

State Aid is any public assistance to an "economic operator" which could distort competition. It can be complicated to determine whether or not the technical tests have been met in any given case but it is important to remember that State Aid can take many forms – as well as upfront payment in the form of grants, it also includes e.g. the government waiving a right to interest or dividends; providing a guarantee to a particular private sector business; selling land or assets at less than market value; or paying more than market value for goods/ services or works.

It is also worth remembering that State Aid covers assistance from any part of the "State" – as well as central government, this encompasses local government, government agencies and many other public bodies.

Matters are further complicated when the recipient of assistance is also fulfilling a public service obligation (which Flybe does on some of its routes).

Is State Aid an EU thing, and does Brexit matter?

These recent reports also serve to remind us that, although we are "leaving" the EU on 31 January 2020, the impact of EU law (which includes the State Aid rules) will continue. State Aid will be a very significant area for discussion between the UK and the EU going forward – while the UK government has expressed its desire to be able to assist and develop UK business going forward, it is unlikely that the EU will grant access to EU markets without the UK signing up to rules equivalent to the EU State Aid rules.

Get in touch

We regularly advise on projects involving public sector partners to ensure they are structured and operated in accordance with State Aid rules; as well as routinely advising recipients and granters of grant funding on State Aid compliance.

 

Useful links

State Aid