Flybe signs Virgin deal despite criticism of it’s management
Troubled airline Flybe has agreed a deal to continue operating, despite criticism of the arrangement. Connect Airways, a consortium led by Richard Branson’s Virgin Atlantic, paid a total of £2.8m for Flybe’s assets and operations.
At least one rival approach for Flybe was rejected. The Exeter-based regional airline put itself up for sale last November, following a profit warning the previous month.
Virgin, Stobart Air and Cyrus Capital joined forces in December to set up Connect Airways.
Following the sale of the assets, Flybe Group will remain as a shell company holding cash. This operation is subject to a 1p-a-share offer by Connect, worth £2.2m.
Shareholders vote on this offer on 4 March. In January, following Connect’s offer, Flybe took a £20m secured loan from the consortium.
Eric Kohn, an aviation entrepreneur, argued that the airline should have approached alternative lenders for any funding shortfall, before seeking a more favourable offer.
He told the Today Programme that the deal appeared to have a “lack of transparency”.
A rival proposal for the airline was supported by Flybe’s second largest shareholder Andrew Tinkler.
Arizona-based Mesa Air proposed an equity injection of £65m at a price of about 4.5p-a-share.
Mr Tinkler was dismissed as the chief executive of Stobart Group – one of the companies behind Connect Airways – last June.
The dismissal was upheld as lawful by a court ruling this month, after a messy legal battle between Mr Tinkler and Stobart.
Flybe fell into difficulty in 2017, after what was considered a too-aggressive expansion strategy. The company ran up a near-£20m loss in the financial year ending 31 March 2017.
This January, one employee was moved to send an email accusing the firm’s directors of ruining a profitable company.
The employee, a senior pilot, addressed the email to Flybe’s chief executive Christine Ourmieres-Widener. “Congratulations, in 2 years at Flybe you and your fellow incompetent cohorts have managed to totally destroy a viable airline which was making profits when you took over,” he wrote.