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smithy108

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Virgin and Stobart take off with Flybe in cut-price deal
Virgin Atlantic will be the largest shareholder in a new airline group comprising Flybe and Stobart Air, Sky News learns.


Image:Flybe is being snapped up in a cut-price deal

Flybe, the regional airline, is close to being taken over by a consortium led by Virgin Atlantic in a cut-price deal that will underscore the aviation sector's huge financial challenges.
Sky News has learnt that Virgin Atlantic has agreed to join forces with Flybe's other suitor, Stobart Group, to form a new company that will also comprise the Stobart Air franchise operation.

An offer for Flybe worth significantly less than the company's closing share price on Thursday of 16.38p will be announced to the London Stock Exchange on Friday, according to sources close to the deal.

The takeover will come less than two months after Flybe put itself up for sale, blaming a toxic cocktail of currency volatility, rising fuel costs and Brexit-related uncertainty.
Although it is small in financial terms, Flybe remains one of the UK's best-known airline brands, carrying thousands of passengers between largely second-tier British airports as well as European destinations.
Under the terms of the proposed deal to be announced on Friday, Virgin Atlantic will operate the network of regional flights provided by a combination of Flybe and Stobart Air.
The carrier part-owned by Sir Richard Branson is expected to be the largest shareholder in the newly formed company, with Stobart Group and Cyrus Capital Partners owning smaller but still substantial stakes.
Stobart is understood to be contributing the assets of Stobart Air rather than any cash in exchange for its stake.
For Virgin Atlantic, control of Flybe's regional network will provide a valuable feed into its long-haul flights to international destinations.
Its return to the domestic UK aviation market will come four years after announcing the closure of Little Red, its previous attempt to make money from a notoriously difficult sector.
Flybe also has access to valuable take-off and landing slots at London Heathrow Airport which are ring-fenced for domestic flights.
The two carriers already operate a code-share pact aimed at improving access to Virgin Atlantic's long-haul routes for regional customers using the regional airline's flights into Heathrow and Manchester.
Rothschild, the investment bank, is advising Virgin Atlantic, while Evercore is advising Flybe.
The consortium's offer for Flybe is likely to value its shares at around£20m, providing few crumbs of comfort for the airline's long-suffering shareholders.
Nevertheless, if the deal is completed, it would be a significant combination in a British aviation sector which is viewed as requiring further consolidation.
Rising oil prices and the weakening of sterling have put airlines under intense pressure, with a deepening industry price war accentuating the financial squeeze.
Monarch Airlines crashed into insolvency in 2017, while more recently, Primera Air, a budget carrier which began offering long-haul flights from British airports last year, filed for administration.
Sir Richard launched Little Red in 2013 after gaining slots that arch-rival British Airways was forced to relinquish after its takeover of bmi.
However, the tycoon threw in the towel less than two years later, blaming the "meagre package of slots" with which it had operated.
Sources cautioned that the door remained open to another bidder for Flybe.
Virgin Atlantic is also entrenched in a process to change its ownership structure, having agreed a three-way deal last year with Air France-KLM and Delta Air Lines under which the Franco-Dutch group would acquire a 31% stake in Virgin Atlantic from Sir Richard's holding company for £220m.
Virgin Group intends to retain a 20% stake and the right to appoint the airline's chairman, while US-based Delta would retain its existing 49% shareholding.
The transaction remains subject to regulatory approvals, which could be affected by a no-deal departure by the UK from the European Union.
Virgin Atlantic's need to secure a berth as part of an alliance with better-resourced rivals was underlined again last year when it reported a £28.4m loss before tax and exceptional items for 2017.
The company announced a change of leadership in June, with Craig Kreeger due to step down next month as its chief executive after nearly six years at the helm.
Stobart, which has been at the centre of a bitter courtroom battle between board members and its former chief executive, abandoned a previous bid for Flybe last year.
Since confirming that it was exploring a sale, Flybe has taken further steps to shore up its finances, announcing an extension of its borrowing facilities and a £5m sale and leaseback of an aircraft hangar.
The Exeter-based carrier, which recently reported a halving of pre-tax profit for the first half of the year, is understood to require an immediate injection of capital.
 
Nov 30, 2014
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Could this be a bad deal for BHX though? Perhaps they will concentrate their main regional hub into MAN as Virgin have a solid presence there already and nothing from BHX. :(
 

GliderPilot

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Personally, i think this is bad news for BHX, if virgin are going completely re-structure the airline which it sounds like they are, over the next couple of years i can visualise a massive reduction of services from BHX, if not a complete withdrawal
 

Coathanger16

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Virgin Atlantic and Stobart link up to take over Flybe
https://www.flightglobal.com/news/a...-and-stobart-link-up-to-take-over-fly-454952/

Virgin to integrate Flybe-Stobart with long-haul network
https://www.flightglobal.com/news/a...rate-flybe-stobart-with-long-haul-net-454954/


Well it's far better than seeing another major player at BHX fall.
Found this part interesting:

"The plan involves creating a UK network carrier, under the Virgin Atlantic brand"

So is this the end of the Flybe brand? Will we see the newest livery rolled out in red instead of purple? Will they be branded as Virgin Atlantic? Or as this new Connect Airways?

As for BHX, aren't we Flybe's biggest base (whether it be most aircraft based, seats available, routes served)? It would show a complete disregard for what Flybe currently is and their customers by Virgin if they close the BHX base. A key consideration will be profitability of various bases - if BHX is making a profit and compares well against other bases it may actually make Virgin reconsider BHX.

The other thing I noted was a few references to 'expanding European footprint". Whether that means more routes to Europe to connect into Virgin's LHR/MAN hubs, or more routes connecting non-Virgin hubs (among them BHX) to Europe we'll have to wait and see.
 

mullion

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May 9, 2014
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Britain cannot afford Flybe to collaps, but what role BHX is going to have now is open to conjecture
as the deal really favours airports with VS operations and Flybe connections and that only happens at 2 airports
with 2 other minors summer only
 

Coathanger16

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Also saw this:

https://www.flightglobal.com/news/a...virgin-shapes-flybe-stobart-combinati-454957/

"No decisions have been made on the locations of a headquarters or engineering centre, but the document says a “material presence” will probably be maintained at Flybe’s and Stobart Air’s respective Exeter and Dublin headquarters."

If MAEL does go, could BHX bid for the MAEL hangers to form the engineering centre for Virgin/Flybe?
 

Jerry

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I'd be very surprised if BHX was dumped especially the domestic connections and Amsterdam and Paris. The other European routes might get the chop but then for all we know they could expand! It'll be interesting to see if they stick with the Q400s or change over time to a jet fleet.
 

rollo

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I've been following this from a financial point of view and as of 10am.today Flybe shares have collapsed 84% to 2.4p per share and the Virgin offer is 1p a share so effectively the owners (shareholders ) have lost their money and are faced with take it or leave it as it stands. What ever happens its difficult to be optomistic for BHX or possibly Flybe themselves at the moment .

I hope our new CEO is battering Easyjets door down with an offer they can't refuse?
 

rollo

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I'd be very surprised if BHX was dumped especially the domestic connections and Amsterdam and Paris. The other European routes might get the chop but then for all we know they could expand! It'll be interesting to see if they stick with the Q400s or change over time to a jet fleet.
The thing is Jerry KLM and Air France operate both routes so for example BHX has about nine or ten rotations a day to Amsterdam and we would probably revert to 5/6 with KLM and the Flybe slots at Amsterdam could be used by KLM for other routes as the are becoming slot constrained there. No need for Flybe?

Easyjet would definitely work on Glasgow and Edinburgh as well as European routes from BHX
 

nwoody2001

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Dec 1, 2014
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Certainly some interesting news, the implications of which seem pretty interesting....

Virgin taking over Flybe seem initially to be great for feeding their Hubs at LHR, LGW and MAN. However, looking at Heathrow, I believe only T2 and T5 can accommodate domestic flying but Virgin are based out of T3. This was considered one of the reasons for the failure of Little Red. Virgin have tried feeder routes but this didn't work. Virgin may also be able to take the slots Flybe currently has for expansion at LHR, but these slots are limited to European services only... again, Virgin are not going to want to do that, unless they see that as increased feeder routes into LHR.

MAN seems to be an obvious winner, but even at the cut price they got the airline at, are they going to sacrifice a whole regional network to benefit 2 hubs????

Also, something which is glossed over here....

VIRGIN DONT OWN VIRGIN!!!! As agreed last year, Virgins ownership is as follows:

49% Delta
31% KLM Air France
20% Virgin

VIRGIN also wont own the new airline, even though it appears it will be rebranded as such.... The new airline with be:

30% Virgin
30% Stobart Air
40% Cyrus Investments

So in my view, things we need to consider....

Against us....

BHX has no Virgin presence
BHX has no Delta presence

For us....

BHX has one of the largest existing Flybe bases which is surely an asset
Excluding existing Virgin Bases, BHX has the largest KLM Air France presence in the UK

interesting times.
 

Jerry

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The thing is Jerry KLM and Air France operate both routes so for example BHX has about nine or ten rotations a day to Amsterdam and we would probably revert to 5/6 with KLM and the Flybe slots at Amsterdam could be used by KLM for other routes as the are becoming slot constrained there. No need for Flybe?

Easyjet would definitely work on Glasgow and Edinburgh as well as European routes from BHX
That is true but i personally think a big operation like BHX should be ok though i'd expect some sort of rationalisation on the AMS route. It's the smaller airports that have more to worry about but we could all be assuming the wrong thing and this could lead to Flybe expanding at it's bases and their network at BHX become bigger.
 

Jerry

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The article mentions limited fleet reductions but Flybe was doing that already so no change there, Flybe was optimising it's routes anyway so not much change there and as for job losses that could be at HQ/management as the Stobart and Flybe HQ get merged. So maybe not as bad as it sounds.
 

smithy108

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The article mentions limited fleet reductions but Flybe was doing that already so no change there, Flybe was optimising it's routes anyway so not much change there and as for job losses that could be at HQ/management as the Stobart and Flybe HQ get merged. So maybe not as bad as it sounds.
Absolutely right, this will be the minimum to be expected from any merger of operations. Duplication of roles at two HQ are bound to be the low hanging fruit. Stobarts level of influence will be interesting, and critical to BHX, given their regional credentials. There is bound to be some rationalisation on routes or frequencies but I would expect the impact to be small for us.
The alternative of FlyBe failing would have been horrendous !
 

Jerry

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I think people also need to think of why Virgin has bought Flybe. As an airline themselves they limited as just a long haul airline but taking over Flybe gives them chance to expand into short haul and expand the airline brand.
 

hammerb32

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As long as the route is profitable you'd imagine new owners wouldn't want to cut it, CDG and AMS are probably at risk but I imagine they'd be at the lower end of the earners. The German routes should be a cash cow, limited competition, attractive to business users etc. Maybe and I know it's a long shot but if the new owners are happy with the network they may see it as perfect to feed into a Delta A330 or 757 flying to JFK.
 

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