SOLD! Are Flybe woes finally over with a new buyer?
As reported previously, the biggest independent regional airline in Europe was struggling financially. Flybe was in dire straits last year, reporting a £22 million loss. Blaming the weakening pound and Brexit, increasing fuel costs and poor passenger numbers, Flybe announced that it was putting itself up for sale. Besides the sale, the airline was considering other options.
Either way, today Virgin Atlantic has announced that they are partnering with Stobart Group and Cyrus to buy the struggling airline. The offer price is a mere £2.2 million – considering the airline has valuable assets. However, for the past 6 years, the airline has been breaking its back to try and not go bankrupt. But why?
The shrinking regional market
The European market is at an interesting place right now, where low-cost airlines such as Ryanair, easyJet and Wizz Air dominate the European regional market with their ridiculously low prices. But other regional airlines, such as HOP!, BA CityFlyer and Lufthansa CityLine also have their own slice of cake, as they are subsidiaries of bigger, full-service airlines. They have natural advantages over Flybe, as they do not depend on themselves to make a profit. Secondly, their networks feed into the parent company‘s network, thus they have much bigger passenger demands. For example, you can board a Lufthansa CityLine aircraft that’s flying from Bremen to Munich. Then, you transfer to a Lufthansa (LHAB) (LHA) flight flying to New York, Miami or any other international, long-haul destination. All of this is operated under one ticket that you purchase. Flybe also had its fair share of codeshare agreements, but even so, their network was not as dense.
With this in mind, being independent has its advantages, as you can develop your routes, fleet and other business related decisions on your own. On the other hand, with rising fuel prices and other costs, having a parent company helps you out massively. Especially if you encounter financial difficulties – a cushion can support your profits falling.
A savior is coming
As I said previously, Virgin Atlantic partnered up with Stobart Group and Cyrus to buy out Flybe. European Commission approved the sale just before the deadline on February 22nd.
What does that mean for the once Jersey-based airline?
Well for one, it won‘t go bankrupt. Flybe won’t join this prestigious list of airlines, that are no longer with us. Next, it will be completely connected to the extensive network of Virgin Atlantic, allowing for more passengers to board its planes. The two regional airlines, Flybe and Stobart Air will be merged into one entity Connect Airways. Flybe will continue to operate independently but under the Virgin Atlantic brand name.
It sounds pretty confusing, but rest assured, I do think this is the best for the whole aviation market. Competition is ramping up not only in London‘s main airports where Virgin (VAH) and British Airways is competing but also across the ocean. Delta Airlines (DAL) runs a joint operation with Virgin Atlantic, thus this acquisition helps both Delta and Virgin (VAH) compete with for every trans-Atlantic passenger. This winter is heating up (and I‘m not talking about the weather) as more and more airlines are struggling to balance their books with rising fuel prices and decreasing passenger demand.
One thing I do hope for though – that people who‘ve worked for Flybe do retain their jobs.
