Virgin Atlantic unveils consortium bid for Flybe

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A Virgin Atlantic-led consortium, Connect Airways, has announced its recommended bid for Flybe.

The offer is at just 1p per share (they were trading at 16p on Thursday) but it comes with a promise of a £100m cash injection.

The deal has been recommended by the Flybe board, but other suitors are free to make counter proposals. No major shareholders had given irrevocable acceptances in advance.

The full offer document is here.

Virgin to bid for Flybe

I did an interview discussing the deal for LBC London News on Friday morning. You can listen by clicking here (click here if you can’t see the player image):

How is the deal structured?

This is a complex deal but, at the same time, there is a certain logic to it.

It is a three-way bid comprising:

Virgin Atlantic (30%_
Stobart Group, which is contributing assets but no cash (30%)
a US private equity group, Cyrus Capital Partners (40%) which previously backed Virgin America

Stobart Group will be injecting its Stobart Air business into the new company. This already operates some Flybe routes under franchise and was formed from what used to be Irish airline Aer Arann. You may remember that Stobart Air was publicly considering a bid for Flybe in 2018 but did not go ahead.

Stobart Group also owns London Southend airport and the offer document talks of the new airline building a strong presence at Southend.

Virgin Atlantic gets to protect its codeshare operation which was feeding a lot of business to Virgin’s Manchester hub. Virgin is under huge pressure at Manchester from Thomas Cook and it can’t afford to lose connecting Flybe passengers.

Virgin will, presumably, also get first dibs on the Flybe slots at Heathrow. The use of these slots is restricted, but they can soon be used for any European destination, Moscow, Cairo or Riyadh. What Virgin will NOT be doing, hopefully, is trying to feed its Heathrow services with domestic connections, because only Terminal 2 and Terminal 5 can handle domestic flights and Virgin Atlantic is in Terminal 3. The story of Little Red is that passengers don’t want to do this. (Whilst BA is split between T5 and T3, the routes out of T3 are those with the lightest connecting traffic.)

I am in two minds about the wisdom of using the Virgin Atlantic brand on Flybe, given the punctuality issues and small aircraft used. It will not necessarily have a positive halo effect on the core operation and it is difficult to see how they can ‘Virgin-ify’ it.

Virgin Atlantic acquisition of Flybe with Stobart Air

Because this is a consortium bid which will require the airline to operate on a stand-alone financial basis from Virgin Atlantic, Flybe will presumably retain its operational identity. There is likely to be a new board but it should be business as usual for the rest of the staff. The offer document says that the Exeter and Dublin (Stobart HQ) offices will remain.

This is clearly the end of using Avios as Flybe’s loyalty currency. As Flybe is to be rebranded under the Virgin Atlantic brand it is clear that the new airline will be offering Virgin Atlantic tier points and Virgin Flying Club miles. It will also be the end of Avios redemptions on Flybe.

More as we get it …..

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Click here to read our detailed summary of all UK credit cards which earn Virgin Points.

(Want to earn more Virgin Points? Click here to see our recent articles on Virgin Atlantic and Flying Club and click here for our home page with the latest news on earning and spending other airline and hotel points.)

Category

Virgin Atlantic and Flying Club

This article is closed to new posts. Discussion continues in the HfP Forums.

Alan says:

11 Jan11 January 09:50

This would be good if they allow Virgin mile redemptions and have decent “taxes and charges” out of Exeter. Have to see how it pans out.
Chris D says:

11 Jan11 January 09:51

An alternative approach, if most pax would be connecting, would be for the services to arrive/depart into T3 (which could use the photo system like T5 does), and for those terminating in London to go down the stairs at the gate and board a bus to T2 Dom Arrivals / Bag Claim.
- John says:
  
  11 Jan11 January 14:27
  
  All this costs money, not something they have in large supply at the moment.
Adam says:

11 Jan11 January 10:02

Flybe Shareprice has opened down near 2p so I am guessing at least a large portion of the shareholders think this is going to happen.
Thomas Howard says:

11 Jan11 January 11:05

If the NQY-LHR route is maintained this could be the end of me collecting Avios, unless I emigrate to Canada. I’d find it infinitely easier to rack up tier points on that route than any other and every interaction I have with BA adds to my negative opinion of them.
- Alex says:
  
  11 Jan11 January 12:58
  
  It better be maintained, it’s moving from LGW to LHR in April for much better connectivity to not only the capital but international flights, it would be a great shame to have to end up going back through LGW but with it being subsidised by the tax payer, I don’t see it changing any time soon.
Simon says:

11 Jan11 January 11:45

Rob, re brand – I’m going to punt that the FlyBe services will be branded as Virgin Connect to ring-fence it from the VS long-haul brand.
- Rob says:
  
  11 Jan11 January 12:32
  
  I would have expected that, but the document does specifically mention “the Virgin Atlantic brand”.
Genghis says:

11 Jan11 January 12:26

lol on the radio interview. “Rob Burgess runs the UK’s biggest frequent flyer website, Heads er, Head or points.com”
- Chris says:
  
  11 Jan11 January 14:51
  
  Also the summary that everyone wins is true for the new shareholders but rather less so for the existing ones!
  - Rob says:
    
    11 Jan11 January 15:56
    
    Not really – you have to assume that the alternative was administration, probably caused by a sharp fall in forward bookings after the initial press speculation.
- Vasco says:
  
  11 Jan11 January 19:14
  
  I think that might have actually been the audio jumping. Happened at a few other points too.
- Alex Sm says:
  
  12 Jan12 January 14:15
  
  “head ‘or points” – as in cockney accent
Lady London says:

11 Jan11 January 12:56

So to land on that Scottish island, on the beach, on Stobart Air, would mean using Virgin miles rather than Avios, in future?
- Genghis says:
  
  11 Jan11 January 13:07
  
  Barra from Glasgow still operated by Logan.
  - Dave says:
    
    11 Jan11 January 13:53
    
    Can you use avios on that flight to Barra?
    - Genghis says:
      
      11 Jan11 January 14:02
      
      No. Flights can be reasonably priced though.
    - Rob says:
      
      11 Jan11 January 14:09
      
      No, not on any Loganair flights (it is no longer a Flybe codeshare).
    - Alex Sm says:
      
      12 Jan12 January 14:18
      
      Rob – you need to write an article before the summer on Barra with a proposed itinerary of when/how best to get there, what to do there and where to stay for a night or two and how to fly back. I heard that flight times vary and it could be difficult to plan it independently but if someone breaks the ice…
    - Genghis says:
      
      12 Jan12 January 17:17
      
      A few of us on here have done the trip. Perhaps an article of a few readers’ stories? I’d be happy to contribute having done the trip back end of 2017.
      - Rob says:
        
        12 Jan12 January 17:39
        
        I am still hoping to do it. It fell through the cracks last year but is absolutely on my ‘to do’ list – and it’s not one I’ll be giving away to the new writer!
    - Alex Sm says:
      
      15 Jan15 January 00:33
      
      @Rob – great, will be looking forward to that and hopefully @Genghis and others will be able to add their experiences in comments to that article
  - Stu N says:
    
    12 Jan12 January 15:04
    
    Alex Sm – the runway is the beach so it only operates at low tide. I’d love to do the trip – need to get my act together and book it for the spring.
    - Alex Sm says:
      
      15 Jan15 January 00:32
      
      This is exactly what I mean
Nick Burch says:

11 Jan11 January 13:57

Hopefully another chance for a Virgin Atlantic status match for BAEC cardholders taking a new domestic flight or two! 🙂

I miss my matched virgin status from the little red days….
- Paul says:
  
  12 Jan12 January 06:34
  
  I tried this and they were inept at processing so it never happened. I think I tried 3 times when using little red.