Flybe up for sale as airline struggles with high oil prices
Europe’s biggest regional airline, Flybe, is seeking a buyer as it struggles with weak demand and high oil prices.
The carrier, which has a busy network of UK and short-haul international flights, has announced “a comprehensive review of the various strategic options open to it to address the current challenges facing the airline industry and maximise value for shareholders”.
The three options are continuing to shrink and cut costs; to strengthen the balance sheet and preserve cash; and to sell the firm. It is in talks with a number of possible buyers.
Flybe’s chief executive, Christine Ourmières-Widener, said: “There has been a recent softening in growth in the short-haul market, as well as continued headwinds from higher fuel and currency costs.
“We are responding to this by reviewing every aspect of our business.
“We remain confident in the vital role that Flybe plays in UK connectivity.”
Flybe began as Jersey European Airways in 1979. It became British European in 2000, and changed its name again to Flybe in 2002.
The Exeter-based airline operates 192 routes from 75 airports and has the highest number of flights at a dozen UK airports, including Aberdeen, Belfast City, Birmingham, Glasgow, Manchester and Southampton.
The announcement came as the airline announced its profits for the six months from April to September had halved to £7.4m, compared with the same spell in 2017. It represents a profit of £1.41 for each of the 5.2 million passengers flown.
Capacity fell by 9 per cent, while revenue per seat rose by 7.2 per cent. Its net debt increased to £82m. During the winter, Flybe loses money.
The airline will continue to shrink, with the aim of shedding eight of the 78 aircraft currently in the fleet by 2021.
On Brexit, it warns that “failure to reach an agreement may put at risk, or damage, parts of the business”.
When the markets opened, the shares initially surged by 35 per cent to 15.8p, but later dropped to 12.2p – close to Tuesday’s close and valuing the company at £25m. On the day its shares first traded in December 2010, the price reached 341p, giving the airline a market capitalisation of £250m.
Flybe has not said who it is talking to. IAG – owner of British Airways, Iberia and Aer Lingus – is looking to expand.
European airlines might be interested in Flybe in order to establish a firm foothold in the UK market, but there are uncertainties over airline ownership rules after Brexit.
One leading aviation insider said: “Any buyer would need to inject around £100m in cash.”
An alternative could be to carve up the airline’s network, with the central core of links connecting Southampton, Birmingham, Manchester, Belfast and the Scottish airports seen as the main prize.
