Flight International 16Mar2020

THIS WEEK

10 | Flight International | 10-16 March 2020 flightglobal.com

I

mpact of the coronavirus

outbreak led to the demise of

struggling UK regional carrier

Flybe, shareholder Virgin Atlan-

tic has claimed.

Virgin Atlantic was one of

three investors in the Connect

Airways consortium that took

over Flybe a little more than a

year ago, and had intended to

develop the airline as a feeder for

long-haul services under the

Virgin Connect brand.

But the company says it has

been unable to turn the airline

around despite efforts from its

personnel and more than £

million ($174 million) of invest-

ment over the past 14 months.

Virgin Atlantic says the corona-

virus had a negative impact on

Flybe’s trading, and as a result the

Connect Airways consortium

“can no longer commit to contin-

ued financial support”.

“We are deeply disappointed

that Flybe has been unable to

secure a viable basis for its con-

tinuing operations,” it adds,

following the regional operator’s

filing for administration, with

Ernst & Young appointed to

handle the process.

Flybe had been under financial

pressure for considerable time,

and Connect Airways was formed

to prevent the airline’s collapse.

Virgin Atlantic teamed with

Stobart Group and Cyrus Capital

Partners to take over the carrier.

But the consortium faced a

potential Flybe collapse earlier

this year, forcing the shareholders

to negotiate a controversial agree-

ment with the government in

January – deferring payment of

air passenger duty – to keep the

airline operating.

Virgin Atlantic says the consor-

tium had since invested £25 mil-

lion of £30 million committed in

January, while the “time to pay”

arrangement with the UK treasury

for the air passenger duty provid-

ed another £3.8 million.

“As a priority we are looking at

options to provide support to

Flybe staff and to assist affected

customers,” states Virgin.

All Flybe flights, including

those operated by Stobart Air,

have been cancelled as a result of

the entry into administration, says

the UK Civil Aviation Authority

(CAA). However, two of Flybe’s

franchise partners, Eastern Air-

ways and Blue Islands, say their

services will continue to operate.

“We know that Flybe’s deci-

sion to stop trading will be very

distressing for all of its employ-

ees and customers,” says CAA

chief executive Richard Moriarty.

There is no government direc-

tive to repatriate Flybe passen-

gers through special flights, says

the CAA, because there is

“capacity in the market” for

them to secure alternative travel

by air, rail or coach.

The UK Department for Trans-

port (DfT), meanwhile, adds that

it is working with the airline

industry to “minimise any dis-

ruption to routes operated by

Flybe, including by looking ur-

gently at how routes not already

covered by other airlines can be

re-established by the industry”.

“Through the reviews of re-

gional connectivity and airport

passenger duty we have an-

nounced, we will bring forward

recommendations to help ensure

that the whole of the UK has the

connections in place that people

rely on,” the DfT says.

Stobart Group holds a 30%

share of Connect Airways. It con-

tributed its regional airline oper-

ation Stobart Air and leasing di-

vision Propius to the consortium,

as part of its investment, but says

Stobart Air’s ability to trade is

not directly affected by the col-

lapse of Flybe.

It is, however, writing down to

zero its investment Connect

Airways, including a contribution

of £43.3 million plus a £7 million

investment made earlier this year.

Stobart Group adds that it has

“foregone” deferred interest from

which it would have benefited in

the future.

But the group points out that

Stobart Air is not wholly-owned

by Connect Airways – while

Connect controls 40% of the

carrier, the balance is held by an

employee trust.

“As such Stobart Air’s ongo-

ing ability to trade is not directly

impacted by the decision to

place [Flybe] into administra-

tion,” it says.

GOOD PROSPECTS

Stobart Group is the operator of

London Southend airport, and

says the facility will experience

a “short-term impact” given

Flybe’s plans to operate several

routes from the site this year.

However, it adds that the longer-

term prospects for Southend “re-

main compelling”.

Flybe, which was established

as Jersey European Airways and

later became British European,

operated a fleet of more than 60

De Havilland Canada Q400 tur-

boprops and Embraer E-Jets. ■

Additional reporting by

Alfred Chua in Singapore

COLLAPSE DAVID KAMINSKI-MORROW LONDON

Coronavirus outbreak seals Flybe’s fate

Shareholder Virgin Atlantic says it could ‘no longer commit’ to regional carrier with trading affected by fear of disease

Connect Airways took over airline 14 months ago, planning to develop it as feeder for long-haul services

AirTeamImages

“Flybe’s decision to

stop trading will be

very distressing for

all of its employees

and customers”

Richard Moriarty

Chief executive officer, UK Civil Aviation

Authority