Flybe shareholders have struck a rescue deal with the British government to keep the regional airline operating, UK business minister Andrea Leadsom said on Tuesday. 

A collapse of Flybe has been averted after the government told the airline it would review air passenger duty (APD) and shareholders agreed to inject additional investment.

It is understood the government is still in negotiations over a possible £100 million loan to Flybe. 

It is also understood the government could allow the airline a short-term extension to settle its APD debts.

“Delighted that we have reached agreement with Flybe’s shareholders to keep the company operating, ensuring that U.K. regions remain connected,” Leadsom said in a tweet.

“This will be welcome news for Flybe’s staff, customers and creditors and we will continue the hard work to ensure a sustainable future.”

Flybe, which has 2,000 staff, was bought by Connect Airways, a consortium created by Stobart Group, Virgin Atlantic and investment adviser Cyrus Capital for a cut-price £2.2 million a year ago.

The Treasury has agreed to review air passenger duty (APD), the tax that adds £26 per passenger to all Flybe domestic return flights.

UK chancellor Sajid Javid said: “I welcome Flybe’s confirmation that they will continue to operate as normal, safeguarding jobs in UK and ensuring flights continue to serve communities across the whole of the UK.

“The reviews we are announcing today will help level up our economy. 

“They will ensure that regional connections not only continue but flourish in the years to come – so that every nation and region can fulfil its potential.”

Connect Airways chairman Lucien Farrell said: “We are very encouraged with recent developments, especially the government’s recognition of the importance of Flybe to communities and businesses across the UK. 

“As a result, the shareholder consortium has committed to keep Flybe flying with additional funding alongside government initiatives.”

Flybe chief executive Mark Anderson said: “This is a positive outcome for the UK and will allow us to focus on delivering for our customers and planning for the future.”