The UK’s biggest regional airline was in talks with the government to reduce the level of Air Passenger Duty (APD) in order to stimulate demand.
APD is a tax unique to the UK that adds £13 to every short-haul flight. The move was deplored by climate-change campaigners including the Flight Free campaign, Greenpeace and Friends of the Earth.
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Ms Leadsom said this evening: “Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that UK regions remain connected.
“This will be welcome news for Flybe’s staff, customers and creditors, and we will continue the hard work to ensure a sustainable future.”
But Willie Walsh, the chief executive of IAG – parent company of British Airways – described the deal as “a misuse of public funds”.
BA competes with Flybe on some routes.
Mr Walsh said: “Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes.
“Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline.”
Flybe had been involved in “last-ditch” talks with ministers about its future, with reports that it would be closed down if the government did not offer help to keep it flying.
The regional airline was close to collapse last winter, but was taken over by a consortium led by Virgin Atlantic. It is due to be rebranded as Virgin Connect.
Transport secretary Grant Shapps said: “Delighted we’ve been able to work closely with Flybe to ensure Europe’s largest regional airline is able to continue connecting communities across Britain,” adding that the Department for Transport “will undertake an urgent review into how we can level up the country by strengthening regional connectivity”.
Pilots’ union Balpa added: “This is good news for 2,400 Flybe staff whose jobs are secured and regional communities who would have lost their air connectivity without Flybe.
“Balpa looks forward to discussing the airline’s future plans in detail with management. Meanwhile, passengers can be confident that Flybe remains an excellent choice for regional flying.
“The government is to be applauded for stepping up to the plate to help one of the few remaining independent UK airlines, and a vital one at that.”
The BBC’s business editor Simon Jack said that the government “pledges to review air passenger duty in run up to budget but will make changes in line with their zero carbon ambitions”.