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Travel industry news

29 May 2019

BY James Chapple

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Flybe sale 'could herald further regional airline consolidation'

The sale of Flybe to the Connect Airways consortium will herald “further regional airline consolidation”, consortium partner Stobart Group has predicted.

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Flybe sale 'could herald further regional airline consolidation'

Flybe franchise operator Stobart joined forces with Virgin Atlantic and Cyrus Capital in January and embarked on a successful acquisition of the struggling regional carrier.


Connect’s eventual £2.8 million deal for Flybe’s assets and operations was completed in February, although the bid remains subject to final regulatory clearance.


Stobart will take a 30% stake, as will Virgin, while private equity investor Cyrus will hold 40%, with profits shared between the partners.


Flybe will be rebranded under a yet unknown Virgin “something” banner, and will provide regional feed for Virgin’s long-haul operations at Heathrow, Gatwick and Manchester. Primarily, though, it will allow Virgin to more firmly establish itself at Heathrow.


Virgin Atlantic chief executive Shai Weiss told TTG in April he envisaged Virgin becoming the UK’s second flag carrier, if it is able to gain a significant foothold at Heathrow with the airport set for expansion through a third runway.


On Wednesday (29 May), Stobart Group posted a full-year (to 28 February) loss of £58.2 million, some £25 million more than its full-year 2018 loss.


Its aviation division though posted full-year earnings of £4.9 million, up from £1.7 million last year, and an increase in passenger numbers from 1.1 million to 1.5 million.


Of the Flybe deal, chief executive Warren Brady said it would allow Stobart to examine “cost synergies” between Stobart Air and Flybe, “reset the cost base” and develop a “London connectivity strategy” involving Southend airport, which the group owns and with which it is targeting annual passenger numbers of five million.


Chief executive Warren Brady said: “The creation of Connect Airways is the first step towards further regional airline consolidation. Stobart Air will continue to provide high-quality franchise operations to Aer Lingus and other key partners.


“The transaction will also see Flybe change its name over time under the Virgin brand and benefit from a more integrated commercial cooperation with Virgin Atlantic’s long-haul operations from London and Manchester.”


Analyst Stifel said it forecast Connect “breaking even” next year (2020) and generating a profit the year after (2021).

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