Flybe and Ryanair have agreed a deal which could see the creation of a new carrier under the Flybe Ireland brand, with Ryanair transferring 43 European routes and injecting €100m into the airline.
The agreement is part of Ryanair’s package of concessions submitted to the European Commission in its latest attempt to win approval for its takeover bid for Aer Lingus.
If successful the deal would see Ryanair transferring 43 European routes and a minimum of nine Airbus A320 aircraft to the new carrier, as well as “the requisite number of flight crew, aircraft engineers, management and facilities”, and “the required number of slots to operate the 43 routes”.
Flybe would purchase the Flybe Ireland brand for €1 million, and Ryanair would inject €100 million of cash into the carrier, as well as the forward sales cash from the 43 routes.
The new carrier would operate from bases in Dublin and Cork, and would “Deploy Flybe’s frequency model on the major city pairs, and its leisure model on the European leisure markets”.
Flybe Ireland would also retain the right to use the Aer Lingus brand for up to three years after the transaction, to “allow it to develop its own brand position in Ireland during a realistic transition period”.
The new carrier would commit to operate an agreed frequency on routes, “with the ability to terminate a certain number of routes per year whilst maintaining stable capacity in the Irish market”.
In a statement Flybe said it had secured support from 64 per cent of shareholders for the transaction, which it believes “represents good value to shareholders”, “is in line with company strategy”, and “leverages the company’s proven skills in mergers and acquisitions”.
The regional carrier said there would be no effect on UK employed staff, with Flybe already having announced restructuring plans as part of a “two year roadmap to return the business to profitability and further exploit European potential” (see online news January 24).
Commenting on the deal Flybe’s chairman and CEO Jim French said:
“Flybe would be delighted to be granted the opportunity to service the Irish aviation market through Flybe Ireland, an airline which would be based in Ireland and dedicated to developing a broad range of scheduled services for business and leisure markets.
“This development of creating a Dublin based airline is in line with the Company’s stated strategy at the time of IPO – which was to diversify away from reliance upon the UK economy. The terms of the deal negotiated ensure that Flybe Ireland will be a well-capitalised, well-funded company, enabling us to deliver upon that strategic aim. Flybe has a history of acquiring businesses of scale, restructuring and refocusing them and as a result delivering profitable returns. This opportunity plays clearly to that corporate strength.
“Flybe would be proud to have the chance to serve the Irish markets, and would be, as we seek to be throughout the rest of Europe, a good employer and corporate citizen.
“However, before Flybe Ireland can come into being there are many hurdles to overcome, not least the EC accepting the remedies offered by Ryanair in its offer to take over Aer Lingus, and then the shareholders of Aer Lingus accepting an offer from Ryanair. However, Flybe has positioned itself well if these events come to pass, while in the meantime we continue to focus upon the delivery of the cost reduction and efficiency plan we outlined in January.”
The European Commission is expected to give it decision on Ryanair’s latest bid for Aer Lingus on March 6, which if successful would pave the way for the Flybe deal to close in May, with the new brand likely to launch in October.
Report by Mark Caswell