Daily Management Review

Virgin Atlantic Could Be The Possible Suitor For Loss Making Flybe: Reports


Reports have indicated that the cash-strapped airlines Flybe could be bought out by Virgin Atlantic.
The British regional airline which is going through a turbulent financial period was put up for sale last week. It is anticipated that during the winter months, the embattled airline Flybe would stand to loose tens of millions of pounds which would come to an average of about £7,000 every hour.
Higher fuel costs and currency fluctuations or the falling pound in addition to “a recent softening in growth in the short-haul market” were cited as the reasons for the financial trouble of the company, said its chief executive, Christine Ourmières-Widener.
No interest in acquiring Flybe had been shown by both easyJet and Ryanair even though their names as potential buyers had emerged earlier. But discussion about a possible takeover of the financially troubled company has been initiated by Virgin Atlantic now according to a report by Sky News.
Delta Airlines and Air France-KLM own the bulk of shares in Flybe and Virgin Atlanticm which was founded in 1984 by Sir Richard Branson, has only a small stake in the carrier.
The US, the Caribbean and Asia are primarily served by the long-haul airline. From 2013 to 2015, it ran a domestic operation called Little Red. That route helped to connect Heathrow with Manchester, Edinburgh and Aberdeen. But the service was stopped following heavy losses.
In 1979, Flybe started its journey as Jersey European and is still the primary airline that connects the Channel Islands and Britain.
A core of primarily north-south routes in the UK, from north-south routes from Aberdeen, Edinburgh, Glasgow and Belfast City to Manchester, East Midlands, Birmingham, Bristol, Southampton and Exeter, is operated by the regional airline. Flybe is also a leading operator at Cardiff, Newquay and Norwich.
It also helps to feeds Virgin Atlantic flights at Gatwick, Heathrow and Manchester, as well as delivering passengers to Air France-KLM across a range of routes to Paris and Amsterdam.
If the deal goes through, there would be little chance of immediate synergy with Virgin Atlantic. While Virgin has only wide-bodied Airbus and Boeing jets, small Bombardier and Embraer aircraft are the mainstay of the fleet of Flybe.
However Virgin can gain from turning the routes of Flybe to create maximum connectivity with the services of Virgin - especially at its Manchester hub and one which has significant expansion scopes unlike those at Heathrow and Gatwick.
A transport firm Stobart Group, which shied away from a bid earlier this year, is believed to be the other serious bidder for Flybe.
Analysts believe that any bid for the airline would not be much more than £20m because that is the current market capitalisation of Flybe after its stock losses. However, any suitor for the airline would also have to bear in mind that tens of millions of pounds would have to be invested in the airline to make it profitable once again.