At a tumultuous time in the European aviation sector, following the collapse of airlines such as Cobalt, Primera Air, Monarch & Air Berlin, the continent’s largest regional carrier has put itself up for sale.
The Exeter-based regional airline confirmed it was “in discussions with a number of strategic operators about a potential sale of the company”, just weeks after a profit warning – stating that the airline would suffer an overall full-year loss of £12m.
The airline has launched a review, considering ‘strategic options’ such as cutting more unprofitable routes in the face of increasing challenges. A spokesman for the airline said that there was no threat to previously purchased tickets as a result of the review.
Flybe has been fighting to overcome losses for over 1 year already – focusing on only the most profitable routes to raise load factors and returning aircraft to leasing companies – but the airline’s financial situation has declined considerably in recent weeks. Since September, Flybe’s share price has plummeted by 75% and the airline is now valued at just £25m – down by £190m since 2010.
what has led to Flybe’s financial woes?
Flybe has blamed the decision to put itself up for sale on the ‘current challenges’ the airline faces. Specifically, higher fuel costs, uncertainty over Brexit and the relative weakness of the Pound Sterling. Truthfully, however, this justification masks the long-term mismanagement and lack of vision at the top of the airline. Flybe has made a string of misjudged decisions over the past few years – culminating in today’s financial woes.
Faced with stiff competition from low-cost airlines such as EasyJet and Ryanair and full-service airlines such as British Airways, Flybe has struggled to identify itself in a crowded market. It is unclear whether the airline’s focus has been solely on domestic flights within the UK or more connectivity to smaller airports across Europe. It is on these routes to continental Europe where low-cost carriers are able to undercut Flybe, given their lower operating cost per seat.
British Airways’ domestic flights possibly exist only due to the airline’s long-standing commitment to the hub and spoke model, giving passengers the opportunity to connect onto the airline’s wide-ranging network in London. This is something Flybe have attempted to replicate in recent years, with the airline’s ‘One Stop to The World’ campaign, promoting connections to worldwide destinations via Birmingham and Manchester but this was largely unsuccessful. Flybe even attempted to funnel passengers through London Heathrow onto flights with partner airlines, launching flights to Edinburgh & Aberdeen from Britain’s busiest airport.
Despite British Airways having owned shares in Flybe historically, today the airline is not a subsidiary of a major airline group, like IAG. This means that, unlike many smaller low-cost airlines across Europe (e.g. Vueling or Level), Flybe has no security blanket as it is not backed by a larger, more profitable airline group.
who are the potential buyers of Flybe?
British Airways previously owned shares in the airline, however, it seems unlikely that IAG would be a potential rescuer to Flybe. Stobart Group – owners of London Southend Airport – are in the frame as potential buyers, having abandoned a previous bid earlier this year.
Ultimately, if Flybe is lost, a large void will be left in the UK domestic market and many smaller airports that Flybe operates from will lose out, including the likes of Southampton, Exeter & Cardiff. Flybe operates 78 aircraft, serving eight million passengers per year, with roots dating back to 1979. If Flybe was to go bankrupt, it would be the largest shock to the European aviation industry since the collapse of Monarch and Air Berlin.