Virgin Atlantic and Stobart Group have swooped on regional carrier Flybe in a cut-price deal that will see the creation of a new joint venture called Connect Airways.
The companies, in conjunction with Cyrus Capital Partners, have agreed an offer of just a penny a share – some £2.2 million – for Flybe, which put itself up for sale late last year.
The price represents a significant markdown on Flybe’s Thursday closing price of 16.38p. Shares in the airline fell to as little as 1.2p this morning following the takeover news.
Under the plans, the airline will be combined with Stobart Air in a joint venture called Connect Airways. It will operate under the Virgin Atlantic brand, meaning the likely return of the Virgin brand to Scottish routes.
Cyrus will own 40 per cent of the new company, while Virgin and Stobart will take 30 per cent apiece.
The three firms have committed to make a £20m bridge available to support Flybe’s current operations, while an additional £80m will be provided to the combined group.
Flybe chief executive Christine Ourmieres-Widener said: “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.
“However, the industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit. We have been affected by all of these factors which have put pressure on short-term financial performance.
“At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows.
“By combining to form a larger, stronger, group, we will be better placed to withstand these pressures.”
Warwick Brady, chief executive of Stobart Group, said: “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, chief executive of Virgin Atlantic, added: “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.”