Virgin Atlantic and Stobart lead consortium to rescue Flybe

Cornelia Mascio
Gennaio 12, 2019

The former chief executive of Stobart Group, the infrastructure conglomerate, has stoked his bitter war with the company by staging an audacious market raid on shares in Flybe, the regional airline.

The move ends months of speculation over the future of the airline which flies several key routes from the Isle of Man, including Manchester and Liverpool.

"We are pleased to have this opportunity to partner with Stobart Group and Cyrus Capital to bring Virgin Atlantic's service excellence to Flybe's customers".

Shares were sent crashing 80 per cent this morning on news of the offer from Virgin Atlantic, Stobart Aviation and U.S. private equity firm Cyrus Capital Partners, which will leave shareholders with just a penny per share - a far cry from Thursday's closing price of 16.38p.

Connect Airways will also buy Stobart Group's regional airline and aircraft leasing business.

The regional airline, like many of its peers, has been hit by higher fuel costs, Brexit uncertainty and intense competition in the sector.

Cyrus is the lead partner with a 40% stake, and the USA hedge fund is also taking a 4.65% interest in Stobart after agreeing to invest £24.7mln.

The offer values Flybe at 1 pence per share, a 94% discount to the company's closing price of 16.38 pence yesterday.

Rising oil prices and the weakening of sterling have put airlines under intense pressure, with a deepening industry price war accentuating the financial squeeze.

The three companies have committed to make a £20 million bridge available to support Flybe's current operations, while an additional £80 million will be provided to the combined group. "At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows".

"By combining to form a larger, stronger, group, we will be better placed to withstand these pressures".

Stobart Air is meant to continue under a separate Irish AOC.

Shai Weiss, chief executive of Virgin Atlantic, added: "The Virgin Atlantic brand is built on the foundation of putting customers at the heart of everything we do, providing them with the choice they deserve and a travel experience they love".

"In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM".

Warwick Brady, boss of Southend Airport owner Stobart Group, advised by Barclays, said the takeover is an "excellent opportunity" to grow passenger numbers at the airport, and to "play an active role in United Kingdom regional flying".

"The combined entity will be a powerful combination with sufficient scale to compete effectively in the United Kingdom and European airline markets".

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