Flybe rescued by Virgin Atlantic and Stobart
Flybe has recommended shareholders accept a cut-price £2.2m takeover offer from a consortium led by Virgin Atlantic, after the regional airline struggled with rising fuel costs, currency volatility and political uncertainty.
Virgin, part-owned by the billionaire Sir Richard Branson, has banded together for the deal with the infrastructure firm Stobart Group and the investment house Cyrus to form a joint venture, Connect Airways.
The consortium would also inject £100m into the struggling airline, in the form of a £20m working capital loan and £80m to invest.
Flybe’s bosses publicly put the company up for sale in November after a profit warning in October prompted plans to cut costs and reduce its flights.
Flybe, which has 78 planes, received interest from multiple parties for all or part of the business. Easyjet, a rival in some of the regional routes Flybe operates, had been seen as a contender, after Stobart Group walked away from a bid for the airline in March.
The consortium’s bid, if accepted by shareholders, would seek to feed regional customers to the long-haul networks of Virgin Atlantic and its American joint venture partner, Delta Air Lines, at Heathrow and Manchester airports. The company said it hoped to “maintain Flybe’s current UK regional focus”.
The £2.2m value of the airline represents a significant fall from grace for a company worth more than £300m less than five years ago.
Christine Ourmières-Widener, Flybe’s chief executive, blamed the airline’s woes on external factors, and said it would be better able to withstand difficulties as part of a larger group.
She said: “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.”
Flybe said it expected “pressure” on its cash flow to continue, and added the offer represented “the most realistic means of securing Flybe’s future”.