Flybe is close to being taken over by a consortium led by Virgin Atlantic, in a cut-price deal that will underscore the aviation sector’s huge financial challenges.
Reported by Sky news last week, Virgin Atlantic and Stobart Group have joined forces to form a new company that will also comprise the Stobart Air franchise operation.
The consortium would inject £100m into the struggling airline, in the form of a £20m working capital loan and £80m to invest.
Flybe put itself up for sale in November 2018, after a slump in first-half profits. Like many of its peers, the regional airline has been hit by higher fuel costs, Brexit uncertainty and intense competition in the sector, damaging consumer and business confidence, and weakening the pound.
Stobart, Virgin and Cyrus Capital have formed a joint venture called Connect Airways, which will house the Flybe business as well as Stobart’s regional airline, Stobart Air, which is being acquired in a £40m deal.
Virgin Atlantic has a 30% stake in the venture. This would provide a valuable feed into its long-haul flights to international destinations, as it looks to utilise the Heathrow and Manchester hubs. It will also rebrand Flybe as Virgin Atlantic – a more robust brand which has existed only since 2002. This would more than double Branson’s fleet, with 78 Flybe aircraft to be repainted.
Stobart Group, which already operates some of its flights under the Flybe brand, wants to boost two airports it owns, Southend and Carlisle.
Cyrus Capital Partners has the remaining 40% share.
What does this mean for staff?
Nothing has been confirmed with regards to the future of staff at Flybe just yet. Sources cautioned that the door remained open to another bidder for Flybe.
What about passengers?
For passengers, all operations will continue as normal, although changes could take effect as early as March 2019, ahead of the summer schedule.
Rising oil prices and the weakening of sterling have put airlines under intense pressure, with a deepening industry price war emphasising the financial squeeze.
Monarch Airlines crashed into insolvency in 2017, while more recently, Primera Air, a budget carrier which began offering long-haul flights from British airports last year, filed for administration.
Flybe’s chief executive, Christine Ourmieres-Widener, claimed the airline would be “better placed” to withstand difficulties as part of a larger group.
“The industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit.
“We have been affected by all of these factors which have put pressure on short-term financial performance. At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows.
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