Troubled airline Flybe is to be rescued by a consortium comprising Virgin Atlantic, Stobart Group – owner of London Southend Airport – and hedge fund Cyrus Capital Partners.
The news follows reports of a 54 per cent drop in half-year profits for the UK regional carrier and news that is has struggled with rising fuel costs, currency volatility and an uncertain political climate.
Virgin and its new partners form a new joint venture, Connect Airways.
Flybe, which has 78 planes, will come under the Virgin Atlantic brand “in due course”.
The sale of Flybe for just £2.2 million marks a stark drop from its £36 million value based on the airline’s closing share price on Thursday of 16.38p. The shares fell by 90 per cent to 1.6p as trading opened on Friday.
Connect Airways has pledged a £20 million working capital loan to support operations and an £80 million investment.
Flybe CEO Christine Ourmières-Widener 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 cash flows.
“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.”
Stobart Group CEO Warwick Brady 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.”