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Regional shake up

Flybe was given a new lease of life by Connect Airways, a consortium formed by Virgin Atlantic, Stobart Group and Cyrus Capital, which offered to acquire the airline. Satu Dahl discusses the ins and outs of the deal
 
UK airline Flybe has a long history in regional aviation, having operated since 1979. The airline, which has several franchise and codeshare agreem ents, recently implemented an operational strategy that included tighter fleet management, improving revenue-per-seat and increasing load factors, which, according to Flybe’s CEO Christine Ourmières-Widener, had resulted in reduced maintenance times and increased efficiencies.
 
However, the airline continued to be negatively affected by higher fuel costs, currency fluctuations, Brexit uncertainty and legacy issues, and in November 2018, Flybe announced that it was ‘undertaking a comprehensive review of the various strategic options open to it to address the current challenges facing the airline industry, and maximise value for shareholders’.
 
This included the potential sale of the company, and in January it was announced that Flybe and Connect Airways, a company formed by Virgin Atlantic, Stobart Group and Cyrus Capital, had reached an agreement on the terms of a recommended cash offer to acquire Flybe for £2.8 million. The offer also included a bridge facility of up to £20 million, and further funding of up to £80 million was also promised by the group’s owners.
 
The companies stated that the combined group would be operating independently to Virgin Atlantic under one management team. Under the deal, Flybe was to continue as an independent operating carrier with a separate UK Air Operator Certificate under the Virgin Atlantic brand, with Stobart Air continuing under a separate Irish AOC.
 
Stronger future
 
Ourmières-Widener said at the time of the announcement that by being part of a larger and stronger group, Flybe would be better placed to withstand pressures facing the industry. Shai Weiss, CEO of Virgin Atlantic commented: “We are pleased to have this opportunity to partner with Stobart Group and Cyrus Capital to bring Virgin Atlantic service excellence to Flybe’s customers. Together, we can 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 Airport. In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”
 
Flybe announced on 22 February that the share purchase agreement regarding the sale of Flybe's two operating subsidiaries, Flybe Limited (including Flybe Aviation Services Limited) and Flybe.com Limited, had completed in accordance with its terms, meaning its assets and operations are now owned by Connect Airways. The airline’s flights continue to operate as normal. The announcement also stated that Flybe Group Plc is now a non-trading entity with no subsidiaries and no material assets other than the limited cash received which is required to cover transaction, residual and rundown costs of the company. It was anticipated that there would be no remaining funds available for shareholders after meeting these costs. >>
 

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