The_Times__6_March_2020

38 2GM Friday March 6 2020 | the times

Business

sions to “fill the gap of flying we have

lost”. Later yesterday it was announced

that three routes — to Newcastle.

Glasgow and Edinburgh — were being

taken over by Loganair, the Scottish

airline.

BELFAST

Businesses and politicians in Northern

Ireland have warned that the economy

could take a significant hit if the vital

travel link between the province and

other carriers such as Easyjet, Ryanair

or British Airways to take the place of

Flybe, Ms Bowen Rees said those air-

lines were “very challenging to attract”

to shorter routes from smaller hubs due

to the nature of their fleets. “There are

other regional airlines but nowhere

near the size of Flybe,” she said.

SCOTLAND

Local calls for a cut to aviation taxes re-

surfaced in the wake of dozens of Flybe

been waiting in the wings for months

to be appointed administrator and so

should have a quick understanding of

the assets and liabilities of Flybe.

EY declined to comment. One indus-

try source said of the investment of Cy-

1

Britain and the European

Union face “very grave and

serious” disagreements that

could scupper a Brexit trade deal,

Michel Barnier said yesterday, as

the first round of talks concluded.

The EU’s chief negotiator said that

the UK’s stance on fishing, human

rights and how a trade deal would

be policed were profoundly at

odds with his mandate. Page 16

2

A self-driving vehicle that can

see around blind spots and

pinpoint a pedestrian from

several streets away has been

unveiled by Google’s parent

company. Alphabet has revealed

its “fifth-generation” model,

developed by its autonomous car

unit, Waymo. Page 18

3

Fears about the Covid-19

outbreak sent world stock

markets deep into the red

again as the virus spread in the US

and UK. US markets suffered

heavy losses last night after the

FTSE 100 had closed down 1.6 per

cent. Page 37

4

Ministers have been accused

of doing a U-turn on financial

support for the struggling

airline Flybe and failing to meet

their pledge to improve regional

connectivity. It also emerged that

credit card companies held almost

£50 million of cash owed to the

airline before its collapse. Page 37

5

The John Lewis Partnership

has given staff a token 2 per

cent bonus, the lowest award

since 1953, after profits fell by a

quarter. The new chairman said

that a turnaround could take three

to five years. Dame Sharon White

has inherited a restructuring plan

to merge Waitrose and John Lewis

operations to save costs. Page 40

6

The Treasury select

committee unanimously

approved the appointment of

Andrew Bailey, the outgoing chief

executive of the Financial Conduct

Authority, as governor of the Bank

of England but said the regulator

had performed poorly both before

and during his tenure. Page 40

7

A row has broken out between

James Benamor and Amigo

Holdings after the founder of

the guarantor loans business said

the company was “committing

slow-motion suicide”. Its stock

tumbled after the controlling

shareholder published allegations

critical of the board. Page 42

8

Financial services companies

are taking action to protect

staff as coronavirus continues

to spread. S&P Global has sent all

its 1,200 staff home after being

visited by someone with the

disease while HSBC sent more

than 100 staff home after a worker

tested positive. Page 43

9

ITV shares tumbled to eight-

year lows after warning that

airlines and travel companies

had cut their advertising spending

sharply in the wake of the

coronavirus outbreak. Page 45

10

Maurice Tulloch, chief

executive of Aviva, made

progress against his critics

with better than expected profits

at the UK insurer. The company

announced an operating profit for

2019 of £3.2 billion, up 6 per cent.

Aviva paid a dividend of 30.9p for

the full year, up 3 per cent. Page 47

Need to know

Turbulent times for cities

Annual operating profit/loss

-30

-20

-10

0

10

20

30

£m

09 10 11 12 13 14 15 16 17 2018

How the regions

will be hit

Just seven weeks ago the government

was hailing Flybe’s survival as evidence

of its efforts to “level up” the nation.

“I’m delighted that Europe’s largest

regional airline will continue to help

connect the whole of the UK for years

to come,” Grant Shapps, the transport

secretary, said.

There was no sign of triumphalism

yesterday. The failure of Flybe will have

far-reaching consequences. As the big-

gest domestic airline in the UK it not

only serves three dozen airports across

every corner of the country, but at some

of these airports it is the main operator.

Local businesses face missing out on

tourism, and national businesses will

have to rethink how and if staff travel to

locations previously served by Flybe.

SOUTHWEST ENGLAND

Flybe’s head office is in Exeter and it

accounts for more than three quarters

of the flights from the Devon city’s

airport (Dominic Walsh writes). The

airline also flew to and from Newquay

in Cornwall, providing a key link

between the area and London.

Local businesses in Devon and Corn-

wall are now concerned that tourism

will suffer. Liz Jones, proprietor of

Cornish Fresh, a convenience store

overlooking the beach at Mawgan

Porth, close to Newquay airport, should

have been celebrating after breaking

through the £1 million revenue mark.

Instead she was worried at the collapse

of the airline that made it possible for

Londoners to “pop down to Cornwall

for a short break” and spend money in

her shop and other local businesses.

While Exeter can also be reached by

motorway, the alternatives for Corn-

wall are more limited. “For us as a

business, I think it enhances our sense

of isolation and lack of connectivity,”

Ms Jones, 59, said. “Flybe has been

great for us, especially with the big

increase in staycations. We’ve had the

A30 road widening but the railway is

still very very poorly maintained and

often closed.”

Malcolm Bell, chief executive of Visit

Cornwall, said: “We understand the

government’s decision and Flybe’s deci-

sion — that’s just life — but the New-

quay route is a public service obligation.

It’s critical and needs protecting. The

government is committed to levelling

the economy and we need that route up

and running within days, not weeks or

months.”

Matt Roach, managing director of

Exeter airport, lamented a “very sad

day” as 15 of the 16 flights due to leave

the airport yesterday were cancelled.

While he said it was too soon to specu-

late about the airport’s future, he added

that the airport was in urgent discus-

the rest of the UK is not taken up by

other airlines (Louisa Clarence-Smith

writes).

Flybe operated two thirds of the

flights at Belfast City airport, with 14

routes to destinations around the UK.

Two of those routes have been taken

over by Loganair and the airport said it

was in discussions with other airlines

about the remaining routes. Customers

have been diverted to Belfast inter-

national airport, where Easyjet runs

ten domestic flights.

Aodhán Connolly, director of the

Northern Ireland Retail Consortium,

said: “We can’t underestimate the

impact of Flybe’s administration on the

economy and Northern Ireland. It’s not

just about people in Northern Ireland

travelling to London, but people being

able to get here and work here and for

Belfast being seen as a hub.” It is a

ten-minute bus journey from the air-

port to the city’s business district.

Brian Ambrose, chief executive of

Belfast City airport, which is owned by

3i Group, said: “We are confident about

the future but there’s a lot of work to be

done.” He added that the airport busi-

ness was in “strong financial health”

with “100 per cent” support from 3i.

CARDIFF

As Flybe tipped into administration,

Wales Week — a London-based show-

case designed to sell the country’s offer-

ing to the world — was drawing to a

close (Callum Jones writes). The airline

connected Cardiff airport with destina-

tions including Dublin, Edinburgh,

Paris and Jersey via some 120 flights

each week.

While making it clear that Flybe only

generated about a quarter of the air-

port’s business Deb Bowen Rees, the

chief executive, said the carrier formed

a “very significant part” of its opera-

tions. She added: “It’s a very difficult

time for the airlines. We’re going to be

working hard with them, but it’s not

going to be a quick fix over the coming

weeks to fully replace all the flights.”

Some routes would “be easier than

others” to fill, Ms Bowen Rees said.

For Welsh businesses, Cardiff has

become a vital getaway for quick and

relatively cheap travel to a wide array of

destinations. It is a “very well-used,

popular airport” for local executives,

according to Heather Myers, chief ex-

ecutive of the South and Mid-Wales

Chambers of Commerce. “The business

community will do what it can to

support each other.”

Cardiff has diversified over recent

years, partnering with the likes of Air

France-KLM and Qatar Airlines to

create routes to Schiphol and Doha.

While the airport hopes to attract

Virgin and hedge fund to claw back some of cash

Alex Ralph

Sir Richard Branson’s Virgin Atlantic

and Cyrus Capital, the Mayfair hedge

fund, are likely to be among the secured

creditors in line to receive payments

from the administration of Flybe after

protecting a chunk of their £135 million

investment in the collapsed airline.

The two were investors along with

Stobart Group, the owner of Southend

airport, last year which acquired the re-

gional carrier for £2.8 million after its

equity investors feared it would other-

wise fail. Cyrus took a 40 per cent stake,

and Virgin and Stobart each owned

30 per cent of the Connect Airways

consortium which owned Flybe.

Stobart, the UK-listed group, had

taken a stake via the sale of its Stobart

Air and Propius, its aircraft leasing

business, while Cyrus and Virgin are

understood to have invested £65 mil-

lion and £50 million last year.

Stobart told investors yesterday that

it was taking a £43.3 million non-cash

writedown, on top of a £7 million cash

investment in January as part of an

emergency injection committed by its

partners.

The Connect consortium arranged

for Global Loan Agency Services

(Glas), a specialist in working with dis-

tressed companies and their backers, to

act as trustee on their stakes and to take

security over certain Flybe assets,

Companies House filings show.

It means Virgin and Cyrus are likely

to be among the secured creditors in

line to claw back some of their invest-

ment as part of the administration by

EY. The professional services firm has

rus and Virgin: “Some of this was asset

backed and some wasn’t backed.”

A spokeswoman for Virgin Atlantic

said Connect Airways had invested

more than £135 million to keep the air-

line flying. “This amount includes ap-

proximately £25 million of the £30 mil-

lion committed in January, alongside a

time to pay arrangement with HM

Treasury for air passenger duty to the

value of £3.8 million,” she said.

Other creditors are likely to include

Flybe’s workforce, pension scheme

members, HM Revenue & Customs

and various suppliers. Flybe had faced a

winding-up petition from HMRC in

January for unpaid passenger duty and

an £844,000 customs excise duty

penalty, according to the witness state-

ment of Mark Anderson, Connect’s

chief executive, reported by Sky News.

Who owns Flybe?

Virgin Atlantic: 30 per cent

Sir Richard Branson retains a

controlling 51 per cent stake in

Virgin Atlantic after Air France-KLM

shelved plans to buy a stake in the

carrier at the end of last year. The

billionaire, 69, launched the airline in

the 1980s with a flight from Gatwick

to Newark in the US. He faced

accusations of hypocrisy this year

after the state rescue package for

Flybe. When people questioned

the future of British Airways a

decade ago, he warned against

ministerial intervention and said the

government “would be better to

wait for its demise”.

Cyrus Capital Partners: 40 per cent

The secretive $4 billion US hedge

fund, with offices in London and

New York, is run by Lucien Farrell in

Europe. It is the largest shareholder

in Connect Airways and Mr Farrell,

45, is the consortium’s chairman.

The well-connected executive

attended Eton with Ben Elliot, now

co-chairman of the Conservative

Party. He became a director at Cyrus

Capital 15 years ago and is based at

its Mayfair office.

Stobart Group: 30 per cent

The £300 million London-listed

infrastructure and engineering

business dates back almost two

decades. It has been led by Warwick

Brady, former chief operating officer

of Easyjet, since July 2017. Mr Brady,

55, has overseen a turbulent spell at

Stobart, which was been rocked by a

boardroom battle that ended up in

court. “Very few people get an

opportunity to deal with this sort of

stuff,” he told The Sunday Times in

2018. As Stobart, which owns the
      London Southend and Carlisle Lake
      District airports, considered its
      place in British aviation, Mr Brady
      had argued that the Connect
      consortium was “the best way for us
      to play an active role”.

A consortium acquired the struggling

regional airline for £2.8 million in 2019