14 JANUARY 2019
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Flybe’s CEO Christine Ourmières-Widener put a brave face on last Friday's (Flybe flies on in this issue) announcement that her airline had been saved from possible extinction. The rescue package announced was the good news involving airport and airline group Stobart, Virgin Atlantic and American private-equity fund Cyrus Capital.
The no-so-good news was that the Flybe name was likely to disappear in a “rebranding”. Or will it? A cash crisis had been averted. Such was Flybe position, in recent weeks it sold its Gatwick slots to Vueling for a reputed £4.5m.
Under Stock Exchange rules 80% of shareholders have to take up the offer in order for it to go through. Former Stobart chief executive Andrew Tinkler, embroiled in a legal row with the current Board, snapped up 10% of the shares before the market closed. What happens next is anyone’s guess.
As the airline CEO noted: “Flybe plays a vital role in the UK’s transport infrastructure with a UK regional network which uniquely positions it to benefit from growing demands from long-haul carriers for passenger feeder traffic.”
The timing was of importance. Wages were due at the end of the month, and suppliers and credit card companies were getting nervous.
The official statement from Connect was of necessity couched in the language of the City, as required in financial transactions of this nature. After mentioning the overall plan, including making available a £20m bridge loan and providing up to £80m of further funding, it ended with the words: “Flybe will continue to serve customers and communities across the UK and Ireland.”
Only then did it add, in one terse sentence: “In due course Flybe will be rebranded to Virgin Atlantic.”
The deal also had to have the support of Virgin’s prospective major shareholder Delta Airlines and includes the current Flybe slots at Heathrow and Manchester.
Far more space was devoted to other matters. The “Combined Group” (Virgin, Stobart Group, Cyrus Capital and Flybe), the statement said, would “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”.
It would also “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”.
Item three said the group would “utilise the strength of the Virgin Atlantic brand, and the offer of an enhanced customer experience in keeping with Virgin Atlantic’s heritage”.
No prizes for noticing which airline’s name occurs most frequently in the document, but does Virgin really need to have its name on minor regional routes between airports to which it does not fly? Cardiff, Exeter, London City and Southampton airports would be delighted but does it fit with the brand? Perhaps for the Scottish routes out of Heathrow and the about-to-be-introduced Newquay operation.
Whatever form Flybe and her future takes, Ourmières-Widener had her say. After noting Flybe’s “vital role”, she added: “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 has 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”.
The current Flybe executive directors are thought to have 12-month rolling contracts.
Paul Simmons, the former chief commercial officer summed up the announcement in a very practical way "Assuming the deal goes through, I’m very pleased for the staff at Flybe who’ve worked so hard to keep the airline going during the uncertainty," he said. "The health of the ongoing operation is obviously also key to numerous regional airports and business communities throughout the UK."
Will the change of name take place? Flybe, in its small way, is a legacy airline. Stobart does business with Aer Lingus, owned by IAG. How will that be affected? Clearly code-shares will be implemented, but a brand change? New Virgin boss Shai Weiss has something to think about.
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