THE GOVERNMENT has found itself embroiled in a row over state aid, after its decision to save struggling regional airline Flybe sparked a series of complaints from rival carriers.

British Airways (BA) owner International Airlines Group (IAG) yesterday filed an official complaint to the European Commission, after its boss Willie Walsh castigated the government for deferring Flybe's tax bill as part of a rescue package.

The deal is also thought to include a £100m loan, as well as up to £30m in contributions from its shareholders. IAG said this contravened EU state aid rules because taxpayers would be subsidising an airline that competes directly on BA routes.

One of Flybe's biggest investors is Virgin Atlantic, a major BA rival.

In a letter to transport secretary Grant Shapps on Tuesday, Walsh wrote that Flybe's owners "want the taxpayer to pick up the tab for their mismanagement of the airline".

"This is a blatant misuse of public funds," he said.

Walsh was joined by Ryanair and Easyjet in opposing the plan. A Ryanair spokesperson said: "We have already called for more robust and frequent stress tests on financially weak airlines so the taxpayer does not have to bail them out." Johan Lundgren, chief executive of Easyjet, added: "We do not support state funding of carriers."

Ministers said they would review the existing air passenger duty (APD) rules — the tax on flights taking off from the UK. However, this drew criticism from railway bosses, who said the move would encourage more people to travel on planes, rather than use less polluting trains.

The Rail Delivery Group, a trade body, said rail was "one of the greenest ways to travel and any review of APD that encourages more people to fly domestically would limit efforts to tackle the climate crisis".

Downing Street insisted it remains committed to free market economics, with any funding given to the airline on "a strictly commercial basis".

Meanwhile, a spokesperson for the Department for Business, Energy and Industrial Strategy added that the government "has not given any state aid to Flybe".

The European Commission said: "We stand ready to discuss with the UK the compatibility and proposed public measures with the EU state aid rules. Any state aid intervention needs to be designed so that competition is not distorted."

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