This article is more than 6 months old

This article is more than 6 months old

Flybe is on the brink of collapse as the coronavirus hits demand for air travel and the government stalls on providing a crucial £100m loan for the regional carrier.

By Wednesday night the airline’s website had stopped working and an error message appeared upon loading stating the link is “no longer live”.

At airports Flybe aircrafts, including in Edinburgh, were not being refuelled and engineers were being laid off, sources told the PA news agency.

The company had reportedly told ministers it could collapse imminently without state help.

Exeter-based Flybe operates almost two in five of the UK’s domestic flights, employing more than 2,000 people, and is a leading carrier at airports including Belfast, Southampton, Manchester and Birmingham.

In January, it was announced that Flybe had been rescued after government efforts led by the former chancellor Sajid Javid and ex-business secretary Andrea Leadsom. The measures included some deferral of tax, talks over a loan and promised reviews into regional air connectivity and air passenger duty (APD).

However, both ministers have since left and there has been no evidence that the new chancellor, Rishi Sunak, plans to cut APD in next week’s budget, as Flybe hoped.

The impact of coronavirus, which has battered the airline industry, now threatens Flybe’s survival before it can benefit from any cut in APD.

Its shareholders first indicated in January that without government assistance, it would be unable to continue. But other airlines, led by British Airways owner IAG and Ryanair, have objected about the prospect of state aid for Flybe, making any bailout increasingly difficult.

Virgin Atlantic – one of the co-owners of Flybe since last year along with transport firm Stobart Air and hedge fund Cyrus Capital – has also been impacted by the coronavirus, and on Wednesday loosened rules on altering flight bookings in an effort to restore passenger confidence.

In the past week, bookings at the airline are understood to have fallen by almost 50% due to Covid-19 fears and it is expecting a significant hit to revenues.

The carrier is putting in place other crisis measures – including cutting executive pay, freezing hiring and pay increases, and offering unpaid leave to ground-based staff.

Flybe and the Department for Transport declined to comment.

Unions said reports of government backsliding were worrying. The Prospect union warned that critical links to the regions would be lost.

Brian Strutton, the general secretary of the British Airline Pilots Association, said: “The government made unequivocal promises to keep Flybe flying and loyal staff and passengers rightly expect this government to keep its word.”

Elsewhere, the German carrier Lufthansa announced it would be grounding more than 150 planes from its 770-strong fleet in response to declining demand.

The International Air Transport Association renewed calls for airports and regulators to relax fees and rules governing slots during the global crisis. Iata’s director general, Alexandre de Juniac, said: “Airlines are experiencing double-digit declines in demand, and on many routes traffic has collapsed.

“Aircraft are being parked and employees are being asked to take unpaid leave. In this emergency, governments need to consider the maintenance of air transport links in their response.”