Flybe’s Demise and the Rise of the Phoenix

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This topic contains 21 replies, has 10 voices, and was last updated by  IanFromHKG 6 Mar 2019
at 01:55
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Viewing 15 posts - 1 through 15 (of 22 total)

  • EruditeSheep
    Participant

    Once upon a time there was an airline called BA Connect, which arose from a rebranding of British Airways Citiexpress and various other BA UK regional operations in February 2006. The airline operated on the LCC model, with hubs at Birmingham, Bristol, London City, Manchester and Southampton. The company was formally transferred to Flybe in March 2007 with an arrangement under which BA had to pay a sum of money to Flybe in order to ensure sufficient funding in order to achieve specific growth targets, whilst transitioning out of the BA aircraft fleet.

    Fast-forward to 2018 and Flybe has grown to become the largest independent regional airline in Europe with more than 210 routes across 15 countries using a mix largely composed of Bombadier Q400 and Embraer 175/195 aircraft.

    The company plays a vital role in the regions, with 2300 employees across 13 locations, serving 9.5m passengers in the year up to November 2018.

    The annual turnover of the Flybe group had grown to about £750m by 2018, but the company had always met challenges in relation to returning profits to shareholders. In the six months to 30 September 2018 its pre-tax profits had fallen by 54% to £7.4m, resulting in a sharp fall in its share price, valuing the company in the region of £25m in comparison with a value of £215m in 2010.

    In November 2018, Flybe announced that it was up for sale and a number of reports emerged of interest shown by IAG, Stobart and Virgin. Its asset base included take-off and landing slots at Heathrow and Gatwick airports, some of which had become available as a result of a commitment required by the EU following acquisition of BMI by IAG.

    On 11 January 2019, the Flybe board of directors recommended acceptance of an offer from a company jointly owned by Cyrus Capital Partners, Stobart and Virgin, ironically called Connect Airways, which valued the entire share capital of Flybe at approximately £2.2m.

    The slots at Gatwick airport were sold the same day to Vueling at a consideration of £4.5m.

    Together with the announcement of the recommended offer, Flybe entered into a secured bridge loan facility with the shareholders of Connect Airways, in the light of which the board of directors announced agreement to sell the company on 15 January, without reference to the company’s shareholders.

    Most of Flybe’s shareholders considered the offer from Connect Airways to be derisory, since it valued their shares at a level of 1p in comparison with a value in excess of 40p when the company’s half-year report was issued September 2018. There has been much criticism of the conduct of the board of directors and indeed calls have been made to refer the conduct of the transaction to the UK Financial Conduct Authority.

    As a frequent passenger on Flybe, I have always appreciated their friendly service, with flights that were generally punctual and comfortable (especially in relation to other LCCs). I wonder how this matches the experiences of other readers.

    4 users thanked author for this post.

    capetonianm
    Participant

    Interesting recap of the history of an important airline which provided useful lifelines to many communities. It looks as if they are now the victims of boardroom duplicity which is sad for all concerned.

    As an aside, for about 4 years I flew fairly frequently on Flybe, mainly in and out of JER, also on IOM routes and a few times to FR, DE and CH. I generally found them unreliable, their ground staff unhelpful and their cabin crew amateurish and surly. I only flew them when they offered the only practical route, which given their network was often the case. Unlike FR, they never quite made my ‘no-fly’ list but they were my least favourite airline. Their ‘loyalty’ programme was arcane and I was never able to use any of the so-called benefits although I admit to never trying very hard to get redemption flights. It will be interesting to see if Connect Airways can improve their performance.


    Mikeact
    Participant

    Credit card ? Disaster. Loyalty programme? Disaster. Management team ? Disaster.

    Who,in their right minds, would spend millions on new aircraft, knowing their financial position was hardly healthy ?

    Watch out for profitable routes to be canned, probably in favour of Manchester to catch the Virgin connections.

    It just beggars belief.


    Bullfrog
    Participant

    I’m a reasonably frequent user of the route from Southampton to Bergerac .. in the Dordogne, where so many Brits live and/or have second homes.

    Southampton Airport is only 70 minutes by train from Waterloo, and with such a short walk through security, it could be more of a ‘London Airport’ than Stansted. It is certainly more enjoyable than Stansted.

    Ryanair do not have a problem running an ‘all year’ service from Stansted to Bergerac, & BA run a summer service 3 or 4 times per week from City Airport.

    BA .. please please please .. operate an ‘all year round’ service from City Airport, even if it is once per week in winter.


    capetonianm
    Participant

    Flybe pensioners could face financial ruin if a rescue takeover led by Virgin Atlantic falls through, after it emerged that the airline’s retirement fund is 
not protected by Britain’s pension 
lifeboat.

    Some £170m of benefits owed to 1,350 members of the British Regional Airlines Group pension scheme may be wiped out if the Exeter-based airline failed because Flybe’s pension fund is registered in the Isle of Man, rather than the UK.

    This means scheme members are not entitled to payments from the 
Pension Protection Fund (PPF) in the event of an insolvency. Flybe had a £11.6m pension shortfall in November 2018.

    https://www.telegraph.co.uk/business/2019/02/02/flybe-pensioners-risk-losing-virgin-takeover-bid-fails/

    Most unfortunate, to put it mildly, and a disgrace that there is no better protection for company pensions.


    AMcWhirter
    Participant

    “Flybe will wind up company if shareholders reject sale”

    https://www.bbc.co.uk/news/47165902


    pheighdough
    Participant

    The current situation at FlyBe is becoming ever more serious. As I read it it’s either take the Virgin deal or the airline ceases to exist. There is the wind-up threat, coupled with the pensions issue. Who knows what else is going on that’s not yet public.

    Of course there is the uncertainty Brexit has on the aviation market. Whilst operationally we may not see much difference initially, behind the scenes there is a whole lot more going on…

    Looking deeper at what this may mean to the UK infrastructure. FlyBe have 4 main UK hubs: Manchester, Birmingham, Belfast City and Southampton. They also have an extensive network to/from Glasgow, Edinburgh plus a host more regional airports. Then there is the franchise agreements, Blue Island operating a majority of their Channel Islands – Southampton routes, the codeshares with Eastern Airlines, Stobart Air.

    If Virgin complete the takeover then would they just be interested in the core feeder routes, focussing on Heathrow (only feeding from Edinburgh, Aberdeen & Newquay) and Manchester? Manchester is a growing hub for Virgin/Delta and makes sense. What about Birmingham, Belfast City and Southampton. Do FlyBe/Virgin want to continue to operate regional services across the UK from there or just use these regional airports to feed the Virgin/Delta/KLM/Air France core hubs of Amsterdam/Paris (CDG & Orly) as part of SkyTeam?

    I can see Exeter remaining as a maintenance base, but with Ryanair coming in, ableit serving a different market, services may dwindle, again just serving the core hubs for SkyTeam?

    Cardiff, Leeds, East Midlands, all may close as a base for FlyBe?

    London City must be making money, they have a large route network from there but again do Virgin have the appetite to run a regional network from there? Who else may be interested? Cityjet have changed business model, BA CityFlyer operate in direct competition but the routes are full with competing carriers. Maybe Stobart will step in?

    The news few weeks will be fascinating and it’s very much watch this space.


    pheighdough
    Participant

    The current situation at FlyBe is becoming ever more serious. As I read it it’s either take the Virgin deal or the airline ceases to exist. There is the wind-up threat, coupled with the pensions issue. Who knows what else is going on that’s not yet public.

    Of course, there is the uncertainty Brexit has on the aviation market. Whilst operationally we may not see much difference initially, behind the scenes there is a whole lot more going on…

    Looking deeper at what this may mean to the UK infrastructure. FlyBe have 4 main UK hubs: Manchester, Birmingham, Belfast City and Southampton. They also have an extensive network to/from Glasgow, Edinburgh plus a host more regional airports. Then there are the franchise agreements, Blue Island operating a majority of their Channel Islands – Southampton routes, the codeshares with Eastern Airlines, Stobart Air.

    If Virgin complete the takeover then would they just be interested in the core feeder routes, focussing on Heathrow (only feeding from Edinburgh, Aberdeen & Newquay) and Manchester? Manchester is a growing hub for Virgin/Delta and makes sense. What about Birmingham, Belfast City and Southampton. Do FlyBe/Virgin want to continue to operate regional services across the UK from there or just use these regional airports to feed the Virgin/Delta/KLM/Air France core hubs of Amsterdam/Paris (CDG & Orly) as part of SkyTeam?

    I can see Exeter remaining as a maintenance base, but with Ryanair coming in, albeit serving a different market, services may dwindle, again just serving the core hubs for SkyTeam?

    Cardiff, Leeds, East Midlands, all may close as a base for FlyBe?

    London City must be making money, they have a large route network from there but again do Virgin have the appetite to run a regional network from there? Who else may be interested? Cityjet have changed business model, BA CityFlyer operate in direct competition but the routes are full with competing carriers. Maybe Stobart will step in?

    The news few weeks will be fascinating and it’s very much watch this space.

    2 users thanked author for this post.

    canucklad
    Participant

    Do FlyBe/Virgin want to continue to operate regional services across the UK from there or just use these regional airports to feed the Virgin/Delta/KLM/Air France core hubs

    The recent FT article on FlyBe’s future definitely doesn’t make good reading…….

    The paradox with FlyBe is that’s its niche in the market place is both an asset and a hindrance.
    And potentially a more robust tie up with Sky Team will strengthen its capital flow .

    And the point about the airlines importance to local economies, particularly the South West can’t be under stated . As for Cardiff, it would be a disaster for the city. It’s the airline equivalent of a one horse town !!

    So, fingers crossed , that the shareholders, employees and investors (Future) do the right thing.


    tomwjsimpson
    Participant

    canucklad
    Participant

    If Virgin do takeover FlyBe, I’ve got one piece of operating advice for the new management team……

    I love the Q400 2×2 on the EDI -LHR run, however if part of their strategy is to compete with BA’s connecting traffic, then redeploy the Embraer’s from Cardiff and go head to head with BA’s larger Airbuses …… For me it would be a no brainer , and as long as price was competitive, I’d choose VS/DL over BA/AA every time.

    Ohh, and bring back the morning breakfast : )

    1 user thanked author for this post.

    pheighdough
    Participant

    Canucklad unfortunately I can’t see the E jets at Heathrow anytime soon. When the Newquay service moves from LGW it’ll become a Q400. I believe that the landing charges for the E jet is 4 times the charge for the turboprop, so you can see why jets aren’t currently used.
    Depending on the deal done this Friday and how the airline will be structured in the future I can see a Q400 only operation with limited UK airports, rather than the current operation.


    TominScotland
    Participant

    I love it, Canucklad. Your dreams are probably why flybmi bit the dust (and bmi before them). Competitive prices (by which read ‘cheaper’) and breakfast and no luggage charges and flexible fares and free drinks and – anything else?


    canucklad
    Participant

    I agree Tom, that it might just be that my dreams are why airlines struggle.
    But why ?
    The race to the bottom seems to have a momentum now that will ultimately mean that consumers are going to be treated more like captive hostages being taken for granted rather than cash splash willing customers who have a choice.
    And by the way, I still hold Branson’s lot in contempt for taking us for mugs with the Little Red venture.

    I believe that the landing charges for the E jet is 4 times the charge for the turboprop,

    And if pheighdough is correct, why oh why does a clumsy slow plane cost 4 times less than a similar sized jet ?
    Just like the 380 , but at the opposite end whenever a Flybe Q400 lands or takes off, I suspect it’ll disrupt the general flow of the operation?


    pheighdough
    Participant

    canucklad interestingly enough the Q400 into Heathrow actually causes very little disruption. The arrival speed on the final approach is the same as all other types (except A380s), and the landing speed is similar to a light A319.

    On departure, the speeds are similar to A319s, and there is a speed restriction imposed for all departures. The only limiting factor is the wake vortex category of the Q400 compared to a Heavy dominated Heathrow operation, but with the right traffic management the impact is less than people think.

    I do agree that a jet movement would be less disruptive, but FlyBe are there to stay and they’ve made a huge effort to fit in and cause minimal disruption.

    4 users thanked author for this post.
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