Welcome to our Monday Briefing for the week beginning 19 November 2018.
Flybe’s Dash For Cash
Flybe released its half-year results last week.
Its profit before tax fell 54% to £7.4m. Revenue fell 2.4% to £409.2m following cuts in capacity and net debt increased 40% to £82.1m.
The all important number however is cash. As at 30 September 2018, the airline has £70.6m of cash compared to £101.3m in the previous year. £16.4m of this is deemed “restricted cash”. Flybe has had to provide partial collateral to two companies that handle its credit and debit card transactions. This may rise and fall in line with seasonal sales patterns.
Flybe has given warning that its ability to trade as a going concern is dependent on card handling companies not demanding additional collateral and it carrying out certain asset sales to raise cash. One of these is the sale and leaseback of its aircraft hangar at Exeter airport for £5m. This was subsequently announced last week. The airline is also being advised on cash flow by the professional services firm KPMG.
The airline has also officially confirmed that it has put itself up for sale. It is unlikely that any buyer would be another airline group. BA sold its former “BA Connect” regional business to Flybe more than 10 years ago. It has since divested of a 15% stake in Flybe. Air France-KLM sold CityJet five years ago. And Lufthansa would not want to repeat its experience with bmi. It can be said with confidence that these groups will have already been approached privately.
That said, there are a lot of parties with a vested interest in the future of Flybe. Of 19 scheduled departures from Exeter airport today, just 1 is not operated by Flybe. Flybe also has dominant positions at Cardiff, Norwich and Southampton airports.
All airlines ultimately depend on cash flow from forward bookings and credit from suppliers. Speculation in itself is not helpful. It would be remiss not to also acknowledge the human impact of any airline failure. The sensible measures that apply to any airline ticket purchase, namely using a credit card and having adequate travel insurance, should not deter anyone from booking with any airline.
On a related note, easyJet announces its annual results tomorrow and should provide an update on recent initiatives in the areas of easyJet Holidays and its loyalty programme.
Of all the American imports into the UK, Black Friday makes the least sense.
The story behind Black Friday is well known. This Thursday is the Thanksgiving Holiday in the US. Black Friday is the equivalent of the UK’s Boxing Day sales and, legend has it, the day that US retailers go into the black. This Friday is of course not Boxing Day in the UK. It’s an ordinary working day. Most people haven’t neither the time nor inclination to plow through scores of e-mails from online retailers and airlines which are more of an irritation than anything else. The vast majority of efforts are also pretty half-hearted.
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