Virgin Atlantic and Southend airport owner Stobart Group are to rescue troubled Flybe. They have made an offer which values its equity of £2.2m, considerably below its closing market capitalisation of £36m. 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.
In addition, the Flybe brand is set to disappear as “in due course Flybe will be rebranded to Virgin Atlantic”. The deal will see Cyrus, Stobart group and Virgin Atlantic commit to pledge 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 combined Connect Airways group will operate independently to Virgin Atlantic under one management team, owned 40% by Cyrus Capital Partners, 30% by Stobart Aviation, a wholly owned subsidiary of Stobart Group, and 30% by Virgin Atlantic, the holding company of Virgin Atlantic Airways and Virgin Holidays.
The group said that the agreement would offer “significant benefits for customers” including:
- 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 CEO Christine Ourmières-Widener commented: “Flybe plays a vital role in the UK’s transport infrastructure with a UK regional network which positions it well 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.
Stobart Group CEO Warwick Brady, a former easyJet executive, reported: “The board of Stobart Group believes that bringing Stobart Air together with Flybe and partnering with Virgin Atlantic and Cyrus Capital is the best way for us to play an active role in UK regional flying.
“The combined entity will be a powerful combination with sufficient scale to compete effectively in the UK and European airline markets. It will allow us to continue to work with Flybe and provides an excellent opportunity to continue to grow passenger numbers at London Southend airport.”
Shai Weiss, new CEO of Virgin Atlantic, said “The Virgin Atlantic brand is built on the foundation of putting customers at the heart of everything, providing customers with the choice they deserve and a travel experience they love.
“We are pleased to have this opportunity to partner with Stobart Group and Cyrus to bring Virgin Atlantic service excellence to Flybe’s customers.
“Together, we can provide excellent connectivity to our extensive long-haul network and that of our joint venture partner, Delta Air Lines, at London Heathrow airport and Manchester airport for the benefit of our customers. In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”.
Cyrus partner Lucien Farrell added: “We are delighted to be working once again with the Virgin Group following our successful partnership in the launch and eventual sale of Virgin America to Alaska Airlines.
“We believe Flybe’s UK regional focus and high quality management, together with Virgin Atlantic’s dedication to the best customer experience and Stobart Group’s expertise in regional flying, will produce a world-class airline.”
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