Stobart in consortium set to take over struggling budget carrier Flybe

Cumbria-based Stobart Group is part of a consortium taking over struggling budget airline Flybe in a cut-price deal.

Flybe is the largest airline in terms of passenger volumes at Birmingham Airport.

Stobart has announced details today of a joint venture, involving Virgin Atlantic, and Cyrus Capital Partners, which has made a recommended cash offer for the Exeter-based operator which put itself up for sale in November, blaming currency volatility, rising fuel costs and Brexit-related uncertainty.

The joint venture, Connect Airways, is acquiring all the Flybe stock, and its to-be-issued stock, in a deal valued at just £2.2m.

It values Flybe shares at just 1p each, compared with their closing price of 16.38p last night.

However, following completion of the acquisition, Cyrus, Stobart Group and Virgin Atlantic are intending to provide up to £80m of further funding to the combined group to invest in its business and support its growth, as well as a contribution of Stobart Air.

Stobart, which owns London Southend Airport and which has been at the centre of a bitter courtroom battle between board members and its former chief executive Andrew Tinkler, abandoned a previous bid for Flybe last year.

At the end of September, Flybe operated a fleet of 78 aircraft.

Commenting on the acquisition, Warwick Brady, Stobart Group chief executive, 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.”

Christine Ourmières-Widener, Flybe chief executive, said: “Flybe plays a vital role in the UK’s transport infrastructure with a UK regional network which positions it well to benefit from growing demands from long haul carriers for passenger feeder traffic.

“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.”

He added: “By combining to form a larger, stronger, group, we will be better placed to withstand these pressures.

“We aim to provide an even better service to our customers and secure the future for our people.”

Connect Airways is a joint venture, the share capital of which is owned 40% by DLP Holdings, a company wholly-owned by funds managed by Cyrus, 30% by Stobart Aviation, and 30% by Virgin Travel Group Limited.

It is also expected that Connect Airways will acquire Stobart Air, Stobart Group’s regional airline and aircraft leasing business.

The combined group is expected to bring benefits to customers, suppliers and employees, providing stability in a tough trading environment.