Struggling airline bought by Virgin Atlantic-led consortium
Struggling airline Flybe has been rescued by a consortium of Virgin Atlantic, Stobart Group and Cyrus Capital who have purchased the carrier for just $2.8 million (£2.2 million).
Flybe announced a profit warning in October and soon put itself up for sale. The airline is losing almost $9,000 per hour and it is predicted that its full-year results will show a loss of more than $15 million.
The purchase price is a massive markdown for the company and offers just over 1¢ per share for the airline which carries 8 million passengers a year.
Flybe’s acquisition marks a return to domestic flights for the Virgin brand. They shuttered their Little Red operation in 2015 after suffering significant losses. Flybe will be rebranded to Virgin Atlantic.
The consortium will provide Flybe with a bridging loan of $25 million to ensure that it is able to continue to operate.
Once the acquisition is complete, a further $102 million of funding will be invested.
The consortium will be named Connect Airways, who will also purchase Stobart’s airline and aircraft leasing service. It will continue to operate as a separate carrier from Virgin Atlantic.
40 per cent of Connect Airways will be owned by Cyrus, a venture capital firm, 30 per cent by Stobart Aviation, a wholly owned subsidiary of Stobart Group, and 30 per cent by Virgin Atlantic Limited, the holding company of Virgin Atlantic Airways and Virgin Holidays.
Flybe operates valuable routes in the UK, as well as short-haul flights to Europe. It already serves as a feeder airline for Virgin Atlantic’s long-haul flights from Manchester and Heathrow where it owns a number of slots.
Many of the routes are likely to survive the acquisition. However, some of its less important flights may be stopped.
Christine Ourmieres-Widener, Flybe’s CEO, said: “Flybe plays a vital role in the UK’s transport infrastructure with a UK regional network which uniquely positions it to benefit from growing demands from long haul carriers for passenger feeder traffic.
“By combining to form a larger, stronger, group, we will be better placed to withstand these pressures. We aim to provide an even better service to our customers and secure the future for our people.”
Ourmieres-Widener also blamed “higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit” for Flybe’s fall from grace.
Shai Weiss, CEO of Virgin Atlantic, said: “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,” she continued.
“In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”