Flybe: Cash-strapped airline rescued by Virgin-led consortium

Two months after Flybe put itself up for sale, the loss-making regional airline is to be rescued by a consortium involving Virgin Atlantic.

Virgin Atlantic has a 30 per cent stake in the venture, as does Stobart Group – whose Irish-based airline, Stobart Air, already operates some of its flights under the Flybe brand.

A hedge fund, Cyrus Capital Partners, has the remaining 40 per cent share in a group called Connect Airways. However, Flybe will be renamed after Sir Richard Branson’s airline.

Virgin’s chief executive, Shai Weiss, vowed “to bring Virgin Atlantic service excellence to Flybe’s customers”.

The parlous state of Flybe is revealed in a purchase price of just £2.2m – valuing each share at one penny.

The buyers will provide an immediate injection of £20m to provide liquidity and keep the heavily loss-making carrier afloat. They will also make up to £80m available in further funding.

After Flybe floated in 2010, at a share price of 295p, the airline’s market capitalisation briefly reached £250m.

One hundred shares in the airline in 2010 were worth the cost of a return flight to New York. When the markets closed on Thursday, the same holding would buy a return train ticket from Southampton Airport to Bournemouth. After the takeover was announced, the shareholding would not even buy a cup of tea at the airport.

Flybe is currently losing £7,000 per hour, as it heads to predicted full-year losses of £12m. The chief executive, Christine Ourmières-Widener, blamed high fuel costs, currency fluctuations and “significant uncertainties presented by Brexit” for the airline’s performance.

“By combining to form a larger, stronger, group, we will be better placed to withstand these pressures,” she said. “We aim to provide an even better service to our customers and secure the future for our people.”

The acquisition statement made no promises about the future route network, saying only: “Flybe will continue to serve customers and communities across the UK and Ireland.”

The carrier began life as Jersey European in 1979, and continues to serve as the main airline between the Channel Islands and Britain.

If the takeover goes through, these links – as well as Flybe’s core mainland British network – are likely to continue.

The airline operates from Aberdeen, Edinburgh and Glasgow to Manchester, East Midlands, Birmingham, Bristol, Southampton and Exeter. It also has a busy network to and from Belfast City.

But some of Flybe’s non-core routes – such as Cardiff to Milan, Doncaster to Alicante and Leeds Bradford to Dusseldorf – may not survive a cull if the new owners continue the current “shrink-to-success” strategy.

Pilots have expressed concern about the future, and say they were not consulted about the takeover.

Brian Strutton, general secretary of the British Airline Pilots’ Association called for guarantees of job security, saying: “We’re pleased to see the previous uncertainty of the company is at last starting to clear but the hard work has just begun.

“We urgently seek to talk with all parties to get further information and clarity over what this will mean for pilots and other employees.”

Flybe feeds Virgin Atlantic flights at Heathrow and Manchester, and the new venture is promising “improved connectivity” to the long-haul airline.

Virgin Atlantic ran a domestic operation called Little Red from 2013 to 2015, connecting Heathrow with Manchester, Edinburgh and Aberdeen. It folded after heavy losses.

Stobart Aviation, which owns Southend Airport, will exploit its stake in the venture to foster expansion at the Essex gateway.

Flybe has some valuable slots at Heathrow. It will begin a four-flight-a-day link between Heathrow and Newquay, using “remedy slots” surrendered by British Airways, in late March.