24 hours have passed since the Connect Airways joint-venture between Cyrus Capital, Stobart Air and Virgin Atlantic has confirmed it is bidding to buy Flybe.
For Flybe’s shareholders, this is an absolute stinker of a deal, valuing their shares at just 1p. They duly responded by crashing the share price from 16.4p to 3.75p on Friday. For Flybe’s long-suffering employees, there is at least some certainty as to the future. The alternative would have been a fairly disorderly and undignified winding down of the airline.
In terms of what happens next, there are still a number of unknowns. However, the Ministry for Speculation and Guesswork has been consulted with the following thoughts:
1. The announcement was interesting for what it didn’t mention.
The announcement made much of the scope to grow short-haul connectivity to Virgin Atlantic and Delta’s long-haul flights and London Heathrow and Manchester.
Apart from Southend airport, which is owned by Stobart Group and Stobart Air operates a Flybe franchise, much less was said about other UK airports.
One airport that won’t feature in the consortium’s plans is Gatwick. Flybe announced on Friday that it has sold its last remaining slots to Vueling for £4.5m.
Nothing was also said about the impact on other Flybe franchise operators such as Blue Islands which flies from London City to Jersey, or Eastern Airways.
There are also other airports which, apart from routes to Virgin hubs and those of Virgin’s forthcoming transatlantic partner Air France-KLM, offer little to the consortium. A cursory scan of the departures board for many airports such as Exeter and Southampton shows that these airports would not be viable without Flybe’s operation. Any significant cuts to Flybe’s schedules at these airports will be politically sensitive.
2. This is high risk for the Virgin brand.
Although the new airline will be operated independently from Virgin Atlantic by a consortium, which is a challenge in itself, in the eyes of the public it will be Virgin Atlantic.
As much as Virgin will try to add a bit of fizz, regional short-haul flying is a painfully unglamorous business. As is the thankless task of feeding passengers to long-haul flights where there is a high risk of missed connections and mislaid baggage.
Virgin Atlantic will be the target of opprobrium for any service failings.
3. There are mixed results for BA and International Airlines Group.
Ultimately, if International Airlines Group wanted to buy Flybe it could have submitted a bid.
It is highly likely that IAG has its sights on bigger “transformational” deals. However, there are some downsides for BA and other IAG airlines.
There is now not a chance of the 12 Heathrow bmi remedy slots that BA has had to make available to Flybe ever returning to BA. The new airline will soon be able to make full use of these for short-haul services in perpetuity. It will also n doubt continue Flybe’s ambition to add more routes in the event of a third runway at Heathrow.
BA made a strategic decision over ten years ago to withdraw from regional short-haul flying. It has also shown no interest in franchising the brand in the UK, having withdrawn from all UK franchise agreements some years ago.
Indeed, much of Flybe today comprises the former “BA Connect” regional operation which BA effectively paid Flybe to take off its hands. BA also sold its 15% stake in the airline. When BA sold BA Connect, it turned its attention to BA CityFlyer at London City, which performs extremely well for the airline. Should Flybe downsize at London City, this will give more scope for BA CityFlyer to grow.
Flybe currently uses Avios as its frequent flyer currency. It is inevitable that Flybe will withdraw from the Avios scheme. This will reduce Avios coverage in UK regional markets. Passengers will be able to earn Virgin Flying Club miles. Virgin Atlantic is due to relaunch its frequent flyer programme this year. This, combined with earning and redemption opportunities on Air France-KLM, will make Virgin’s frequent flyer programme a much more competitive rival to the BA Executive Club.
Aer Lingus does rely on Flybe to operate codeshare routes from some UK regional airports such as Exeter and Southampton to Dublin, and these may well cease.
IAG CEO Willie Walsh will no doubt offer some “forthright” views on the merits of the deal when IAG announces its annual results next month.
5 thoughts on “What’s Next For Flybe?”
“There is now not a chance of the 12 Heathrow bmi remedy slots that BA has had to make available to Flybe ever returning to BA. The new airline will soon be able to make full use of these for short-haul services in perpetuity.”
May I enquire as to the source of this statement? I don’t recall reading anywhere at the time that this would be the case. Firstly, BA didn’t “make them available to Flybe” – they simply had to put them back in the pot to be offered up to whichever carrier wanted to use them specifically on the ABZ and EDI routes. At the time, it was Virgin’s Little Red that came forward, but they then pulled out due to heavy losses. After a year and a half unserved, Flybe then decided to have a go and are still operating these two routes under the original terms of the EU’s approval in 2012.
My vague recollection of the original deal back in 2012 is that these specific remedy slots would revert back to BA at some fixed date in the event of their no longer being used as per the original conditions, i.e. EDI and ABZ flights…..
For now the slots must be used for the designated routes under the slot release procedure. However, after they have been used for six consecutive IATA seasons, Flybe acquires them under grandfathering rights and can use them for any short-haul service.
So it’s not 6 consecutive seasons by the same carrier, i.e. Flybe wouldn’t have to be the operator for all 6? Also, wouldn’t the 18 month gap between Little Red and Flybe operations mean that there have not yet been 6 consecutive seasons? Or does “consecutive” not really mean consecutive at all?
I bet the legal people have been having a field day with all this!
It is six consecutive seasons by the same carrier, but I expect the new Virgin branded airline would effectively be the same carrier as it should continue to use Flybe’s Air Operator Certificate.