Virgin Atlantic and Stobart Group have confirmed an agreement to purchase struggling regional carrier Flybe.
Along with Cyrus Capital the airlines will create a new company Connect Airways, within which will sit Flybe, as well as Stobart Air and aircraft leasing business Propius.
It spells the beginning of the end for the Flybe brand, as the agreement said that “In due course Flybe will be rebranded to Virgin Atlantic”.
The deal will see Cyrus, Stobart group and Virgin Atlantic commit to make available a £20 million bridge loan to support Flybe’s ongoing working capital and operational requirements.
The companies will also provide up to £80 million of further funding to the combined group to invest in its business and support growth.
The group said that the agreement would offer “significant benefits for customers”, as follows:
- 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
Flybe will continue as an independent operating carrier with a separate Air Operator Certificate, under the Virgin Atlantic brand.
The combined group will also operate independently to Virgin Atlantic under one management team, and will be 40 per cent owned by Cyrus Capital Partners, with Stobart Aviation holding 30 per cent, and 30 per cent by Virgin Atlantic Limited.
Commenting on the news 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. We have successfully implemented a clear strategy in recent years focused on tighter fleet management, improving revenue per seat and increasing load factors. The pursuit of operational excellence has reduced maintenance times and increased efficiencies and customer satisfaction.
“However, 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 has 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.
“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.”
Shai Weiss, CEO of Virgin Atlantic said that the deal would 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, adding that “In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM”.