Flybe collapses, despite huge investment by its owners – it is not getting more UK government cash

Date added: 5 March, 2020

UK airline Flybe has collapsed into bankruptcy after months of talks with the government failed to secure a £100m loan. All flights have been cancelled. It was financially very weak, and the outbreak of Coronavirus hit its demand hard, speeding its demise. About 2,000 staff jobs are at risk. The government had rejected the idea of a state loan to the airline. Flybe had been told there might be a cut in Air Passenger Duty on domestic flights, but that would not happen fast enough to save the failing airline. Flybe was taken over in 2019 by “Connect Airways”— a consortium of Virgin Atlantic, Stobart Air and hedge fund Cyrus Capital – to prevent it falling into administration. Connect agreed in January to invest £30m into Flybe to continue operations, as part of a government rescue package that included APD cuts. Virgin Atlantic had invested over £135 million in Flybe to try to keep it going; that includes about £25m of the £30m committed in January 2020, alongside a “time to pay” arrangement with the Treasury on air passenger duty of £3.8m. Flybe’s administration follows last year’s failure of Thomas Cook, which also went bankrupt. Unless other airlines take up the Flybe routes, demand at many UK regional airports (eg. Southampton, Exeter, Newquay) will be hugely reduced.
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Flybe: airline collapses two months after government announces rescue

Impact of coronavirus on flight bookings proves final straw for Europe’s largest regional airline

By Gwyn Topham Transport correspondent (Guardian)

@GwynTopham

Flybe, Europe’s largest regional airline, has collapsed into administration less than two months after the government announced a rescue deal.

The impact of the coronavirus on flight bookings proved the last straw for the Exeter-based airline, which operates almost 40% of UK domestic flights, as the government stalled on a controversial £100m loan.

The UK Civil Aviation Authority announced early on Thursday morning that the airline had entered administration.

It said all flights were cancelled and urged passengers not to go to airports.

Anderson said: “The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.”

The transport secretary, Grant Shapps, tweeted it was “very sad” Flybe had gone out of business after serving passengers for four decades. He said the government was “urgently working” with the airline industry to “identify how key routes can be re-established by other airlines as soon as possible”.

Flybe’s bankruptcy has come only a week before a budget that it hoped would help bolster its precarious finances, after the previous chancellor said he would look again at levels of air passenger duty (APD) .

However, the airline’s owners Connect Airways – a consortium of Virgin Atlantic, Stobart Air and the hedge fund Cyrus Capital – have pulled the plug, a little over a year after buying it.

The airline employed more than 2,000 people and was one of the leading carriers at airports including Belfast, Southampton, Manchester and Birmingham. About 8 million people a year used its services. Unions have warned that other jobs would be put at risk by Flybe’s collapse and transport links lost on dozens of domestic routes where it is the sole operator.

Flybe has long struggled to balance the books, despite cost-cutting plans and redundancies, and was reporting losses of about £20m a year before the Connect takeover.

With the new government having promised to “level up” the economy, it was anxious to demonstrate it was helping the ailing airline and ministers announced the Flybe rescue in January. However, the measures – which included some deferral of tax, a potential loan and promises to review regional air connectivity and APD levels – have not proved enough.

Public anxiety and curbs on business travel because of the coronavirus outbreak have forced airlines around the world to retrench in the face of falling bookings and Flybe was also suffering from the drop in demand.

The government has been unwilling to bail out Flybe, despite calls from unions and MPs in the regions, with other airlines, led by the British Airways owner, IAG, and Ryanair, objecting about the prospect of state aid and threatening legal action.

It is the second major British airline to go bankrupt in six monthsafter the collapse of Thomas Cook last September.

Unite’s national officer for aviation, Oliver Richardson, said it was “outrageous” that the government had not learned the lessons of the collapse of Monarch and Thomas Cook. He said Flybe staff would be feeling “angry and confused”.

He said: “The UK economy is highly dependent on a viable and supported regional airline and airport network. For central government not to support and nurture this, especially as we deal with the twin uncertainties of the Covid-19 virus and the changes that will come with Brexit, is unhelpful and irresponsible.”

Andy McDonald, the shadow transport secretary, said the loss of Flybe would cause “real anxiety” throughout the country.

https://www.theguardian.com/business/2020/mar/05/flybe-collapses-two-months-after-government-announces-rescue

Southampton, Exeter and Newquay are the main regional airports likely to have their demand cut by loss of Flybe

March 5, 2020

The collapse of Flybe, which lost money year after year even when given repeated cash injections, puts the jobs of around 2,000 staff at risk. Almost 1,000 staff are based at Flybe’s Exeter headquarters. Other jobs in the supply chain, in several regions, will also be at risk. It will have considerable impacts on many regional airports, for which Flybe was one of the main airlines. About 95% of the flights using Southampton airport were Flybe. (Southampton is planning to get its runway, currently 1,723 metres in length, extended by 170 metres, to get in more larger planes and more traffic). The airline industry – and still the UK government – are keen to insist we need “regional connectivity” by air. In reality, in a carbon-constrained world, many journeys that do not involve crossing sea, can be done by rail, coach or even by road, with much lower carbon emissions. Other airports that will be seriously affected by the loss of Flybe are Exeter and Newquay, where Flybe operated the majority of flights. Blue Islands, the Flybe franchise partner operates flights linking the Channel Islands with Bristol, London City and Southampton, said it was continuing its flights.

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Flybe failed despite £135m cash injection

Ministers are being urged to come up with answers over maintaining regional connectivity following the collapse of Flybe.

As some airlines started issuing rescue fares for stranded passengers, questions were being asked about the viability of regional airports such as Belfast City, Exeter and Southampton which were hugely reliant on Flybe flights.

Alan Hudson, Joanne Robinson, Lucy Winterborne and Simon Edel of accountancy firm Ernst & Young (EY) were appointed as joint administrators in the early hours of this morning.

Joint shareholder Virgin Atlantic confirmed that more than £135 million had been pumped into the airline over the past 14 months to keep it flying.

This amount included about £25 million of £30 million committed in January 2020, alongside a ‘Time to Pay’ arrangement with HM Treasury for Air Passenger Duty to the value of £3.8 million.

A Virgin Atlantic spokesperson said: “Sadly, despite the efforts of all involved to turn the airline around, not least the people of Flybe, the impact of Covid-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.

“As a priority we are looking at options to provide support to Flybe staff and to assist affected customers.”

Virgin Atlantic, Stobart Group and Cyrus Capital Partners formed the Connect Airways consortium which intervened in 2019 to prevent the collapse of Flybe and keep Europe’s largest regional airline flying.

Flybe carried 8 million passengers a year between 71 airports, with more than 189 routes across 12 countries and over 2,000 staff.

The Civil Aviation Authority confirmed that all Flybe and Stobart Air flights had been cancelled. Franchise partners Eastern Airways and Channel Islands carrier Blue Islands are maintaining services.

The government pledged to bring forward recommendations to “help ensure that the whole of the UK has the connections in place that people rely on” through previously announced reviews of regional connectivity and Air Passenger Duty.

A government spokesperson said: “The vast majority of Flybe routes are served by different transport options, and we have asked bus and train operators to accept Flybe tickets and other airlines to offer reduced rescue fares to ensure passengers can make their journeys as smoothly as possible.

“We know this will be a worrying time for Flybe staff and our Jobcentre Plus Rapid Response Service stands ready to help them find a new job as soon as possible.

“We are working closely with industry to minimise any disruption to routes operated by Flybe, including by looking urgently at how routes not already covered by other airlines can be re-established by the industry.”

Flybe’s financial difficulties were described by government as being “longstanding” and pre-dated the coronavirus outbreak, the spokesperson added.

But Labour shadow transport secretary Andy McDonald described the failure as “disastrous news” which will cause real anxiety for many UK regions.

He said: “Flybe has provided critical connectivity for many locations throughout the country, especially where there is currently no realistic transport alternative other than flying.

“The government has to answer how those vital links will be maintained following Flybe’s collapse. Communities will be concerned about what this will mean for their local economies.”

He called on transport secretary Grant Shapps to “come up with answers to these questions as a matter or urgency.”

Unite union national officer Oliver Richardson said the entire staff at Flybe will be feeling “angry and confused” about how and why the airline has been allowed to collapse.

“It is simply outrageous that the government has not learned the lessons following Monarch and Thomas Cook’s collapses, the much promised airline insolvency review has still not materialised,” he said.

“While other European countries are able to introduce measures to keep airlines flying when they enter administration, the UK remains unable or unwilling to do so.

“The UK economy is highly dependent on a viable and supported regional airline and airport network.

“For central government not to support and nurture this, especially as we deal with the twin uncertainties of Covid-19 virus and Brexit, is unhelpful and irresponsible.

“Other major airlines have repeatedly said that they are ready and willing to organise flights on Flybe’s routes and for the sake of the passengers and communities that the airline served, the government must ensure that those commitments become reality.”

Mark Anderson, chief executive of Flybe parent Connect Airways, told staff that coronavirus had impacted the airline and its shareholders – which include Virgin Atlantic and Southend airport owner Stobart Group – and put “additional pressure on an already difficult situation”.

He apologised for not being able to secure the funding needed to support a turnaround plan for the airline.

“While our shareholders and the leadership team have worked with the government and key suppliers to try to get the funding and support needed, this has not materialised,” Anderson said.

Which? Travel editor Rory Boland said: “This will be terrible news to Flybe passengers, many of whom were loyal customers and used the airline regularly.

“Unlike Thomas Cook’s collapse, most people flying Flybe won’t have Atol protection so the government is unlikely to step in and repatriate those abroad or provide refunds.

“Instead passengers with travel insurance should check if their policy includes scheduled operator failure cover.

“Alternately, those who booked tickets costing more than £100 with a credit card will be able to claim from their credit card provider.

“If the tickets were under £100 or booked with a debit card, passengers can try to use chargeback from their bank or card provider.“

Belfast City airport chief executive Brian Ambrose said: “Flybe had operated a strong and profitable base of 14 routes to key regional destinations across the UK.

“The airline was a significant economic driver for the region, carrying 1.6 million passengers to and from Belfast in 2019.

“I am confident that these well-established routes, coupled with our city centre location and recent £15 million investment in terminal facilities, will prove an attractive option to airlines.

“Negotiations with a number of carriers are already underway.”

The airline was originally formed in 1979 as Jersey European Airways and operated under the Flybe name since 2002.

http://travelweekly.co.uk/articles/360760/flybe-failed-despite-135m-cash-injection

Flybe collapses after last-ditch talks with government fail

UK airline failed to secure crucial £100m after coronavirus hit travel demand

By Tanya Powley and Jim Pickard in London

5.3.2020

UK airline Flybe has collapsed after months of talks with the government failed to secure a crucial £100m loan and the deadly coronavirus slashed demand, pushing Europe’s largest regional carrier into bankruptcy in the early hours of Thursday morning.

Flybe confirmed it had entered administration after holding last-ditch talks with the government on Wednesday afternoon, a move that puts more than 2,000 jobs at risk and raises uncertainty over scores of regional air routes within the UK.

“All flights operated by Flybe have been cancelled with immediate effect,” the airline said in a statement.

“Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business,” the statement said. “This has been compounded by the outbreak of coronavirus which in the last few days has resulted in a significant impact on demand.”

EY is handling the airline’s administration.

The Financial Times revealed earlier on Wednesday that the government had rejected the idea of a £100m state loan to the airline. Meanwhile, Flybe’s management became increasingly concerned that any cuts to air passenger duty might not kick in until 2021, which would be too late for the airline to survive the coming months.

While Flybe initially had enough money to see the airline past the UK Budget next week, the impact of coronavirus on bookings has “sped things up”, according to one person with knowledge of the matter.

“The impact of coronavirus has made a bad situation worse,” said another person close to the airline. “It has been in a pretty precarious position for a while — it doesn’t take much to push it over the edge.”

The airline was taken over by Connect Airways — a consortium of Virgin Atlantic, Stobart Air and hedge fund Cyrus Capital — last year to prevent it falling into administration.

Connect agreed to invest £30m into the airline to continue operations as part of a government rescue package in January.

A potential loan to Flybe was part of a rescue deal announced almost two months ago. But the airline’s request did not meet certain criteria set by the government, according to Whitehall officials.

Grant Shapps, transport secretary, said it was “very sad” that the company had gone out of business after four decades. The government was working with other transport providers to help Flybe customers get home, he said: “We are also urgently working with industry to identify how key routes can be re-established by other airlines as soon as possible.”

A Virgin Atlantic spokesperson said the consortium of owners had over the past 14 months invested more than £135m to keep Flybe flying for an extra year. This amount includes about £25m of the £30m committed in January 2020, alongside a time to pay arrangement with the Treasury on air passenger duty of £3.8m.

“We are deeply disappointed that Flybe has been unable to secure a viable basis for its continuing operations and has therefore entered administration,” the spokesperson said. “Sadly, despite the efforts of all involved to turn the airline around, not least the people of Flybe, the impact of Covid-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.”

Mark Anderson, chief executive of Flybe, which has operated since 1979, said: “The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.”

Flybe’s administration follows last year’s failure of UK travel group Thomas Cook, which was liquidated after it was unable to secure a lifeline from the government. The Civil Aviation Authority had to launch the biggest emergency repatriation in peacetime to bring back about 150,000 UK holidaymakers stranded abroad.

The situation is likely to be very different with Flybe as it largely serves domestic routes. A statement from Flybe confirmed the CAA would not be co-ordinating the repatriation of stranded customers, noting that passengers who had booked flights with Flybe should check the regulator’s website for further information.

The collapse comes after a difficult decade for the carrier, which has struggled with profitability since it floated in 2010. It has undergone several restructurings by successive management teams.

Flybe’s administration raises questions for the government over the future of important regional air routes in the UK. The airline is responsible for nearly 40 per cent of all domestic UK flights and carries more than 9m passengers annually.

Shadow transport secretary Andy McDonald called the news a disaster: “The collapse of Flybe is disastrous news for passengers and employees alike and will cause real anxiety in many regions throughout the country.”

Arlene Foster, the head of Northern Ireland’s Democratic Unionist party, called the collapse “a big test for government commitment to UK regional connectivity”.

John Strickland, a London-based aviation consultant, said Flybe’s business model “has been challenged for a long time”. “It suffered from previous over ambitious fleet expansion which successive managements have grappled with but still remained too big to be viable in the regional air service market,” he said. “On top of this surface competition and the heavy air duty passenger tax burden added salt to the wounds.”

https://www.ft.com/content/c508a296-5e90-11ea-b0ab-339c2307bcd4

Flybe collapses, despite huge investment by its owners – it is not getting more UK government cash

Southampton, Exeter and Newquay are the main regional airports likely to have their demand cut by loss of Flybe

Flybe collapses after last-ditch talks with government fail

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