Struggling regional airline Flybe (BE/BEE) is to be rescued by a consortium involving Sir Richard Branson’s Virgin Atlantic and the Stobart Group.
Flybe put itself up for sale two months as cash levels were putting the airline’s operations at serious risk and it realised that a take-over was the only way to prevent a collapse of the airline which would have been catastrophic for many regional airports including Exeter, Southampton and Cardiff.
Talks have been going on for several weeks but now a deal has been reached that will see Virgin Atlantic (30%) and Stobart Group (30%) come together with hedge fund Cyrus Capital Partners in a group that will be called Connect Airways. The purchase price for is just £3.2m giving an indication of just how bad things were at the airline.
The name of the consortium perhaps hints at the key interest for Virgin Atlantic as it will allow flights to operate as “feeder” flights to Virgins operations at Heathrow and Manchester from smaller regional airports, something it already does in a codeshare agreement but now, being part of the same airline it can offer improved connectivity.
Stobart Group, which includes Stobart Air will use its fleet, along with Flybe’s fleet of regional jets and turboprops to operate flights but it is likely that routes that aren’t central to Flybe’s operations such as flights to European countries such as Italy and Germany from Cardiff, Leeds and other smaller airports will lose out to an increased focus on Domestic operations.
For the Stobart Group, it is likely to view the take over as an opportunity to boost expansion at London Southend Airport which it owns.
The group is making £20m available to the Flybe operation immediately to sure up the airline whilst the takeover goes through.
What the Group says it will bring to Flybe:
Deliver more choice to customers by linking UK regions and Ireland to Virgin Atlantic’s extensive long-haul network through improved connectivity at Manchester Airport and London Heathrow
Provide a strong foundation to secure the long-term future of Flybe, its customers and its people by leveraging the combined commercial, operational and functional expertise and scale of Virgin Atlantic and Stobart Group
Utilise the strength of the Virgin Atlantic brand, and the offer of an enhanced customer experience in keeping with Virgin Atlantic’s heritage
Provide the Combined Group with an enhanced presence at Manchester Airport , London Heathrow Airport, with the potential to grow further in London Southend Airport
Speaking about the merger Shai Weiss, CEO of Virgin Atlantic said: “The Virgin Atlantic brand is built on the foundation of putting customers at the heart of everything we do, providing them with the choice they deserve and a travel experience they love. All possible because of our amazing people.
“We are pleased to have this opportunity to partner with Stobart Group and Cyrus Capital to bring Virgin Atlantic service excellence to Flybe’s customers. Together, we can provide greater connectivity to our extensive long haul network and that of our joint venture partners Delta Air Lines, at Manchester Airport and London Heathrow. In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”
Warwick Brady, CEO of Stobart Group added: “The Board of Stobart Group believes that bringing Stobart Air together with Flybe and partnering with Virgin Atlantic and Cyrus Capital is the best way for us to play an active role in regional airline consolidation.
“The combined entity will be a powerful combination with sufficient scale to compete effectively in the UK and European airline markets. It will allow us to continue to work with Flybe and provides an excellent opportunity to continue to grow passenger numbers at London Southend Airport.”
BALPA, The British Airline Pilots Association is understood to be seeking urgent talks with the group.
BALPA General Secretary, Brian Strutton, said: “BALPA wants to see guarantees of job security and a commitment to a positive future for our members in Flybe.
“We’re pleased to see the previous uncertainty of the company is at last starting to clear but the hard work has just begun. There has been no consultation with us by Flybe so we don’t know whether the deal on offer is good news or not – the jury is out.
“We urgently seek to talk with all parties to get further information and clarity over what this will mean for pilots and other employees.”