As we covered last week in some detail – see here for example – the airline has invited offers of interest from other airlines or investment groups.
There is obviously some logic in a deal, although less than you might think. Flybe sold the bulk of its Gatwick slots of easyJet in 2013 so there is a limit to how much ‘feed’ it can provide to Virgin Atlantic there. Flybe has routes from Aberdeen and Edinburgh to Heathrow (which Virgin used to run under the Little Red brand) and will start Newquay to Heathrow next year.
More importantly, Flybe is already a Virgin Atlantic codeshare partner on many routes, especially out of Manchester. Here is the Virgin Atlantic / Flybe codeshare list. I would be very surprised if other rumoured bidders such as Stobart would end these deals, although I accept that Virgin Atlantic may believe that the modest cost of buying Flybe means it is not worth taking the risk.
The codeshare only covers a small part of the Flybe route network, however. Unless there is an opportunity to gain a large number of new slots at Gatwick it is difficult to see how much extra feed Flybe could bring if it was wholly owned by Virgin Atlantic.
Virgin Atlantic is also in the middle of a restructuring of its own, with Air France KLM in the final stages of acquiring a 31% stake. This has already had to be overhauled once in order to deal with the carve-out of the assets of Virgin Flying Club into the new Virgin Group Loyalty Company, in which Air France KLM will have no stake.
We then come to Avios. It isn’t clear how much business the use of Avios drives to Flybe, but the airline clearly believes it is worthwhile or it would not be continuing with the deal. We can be 99.9% sure than the acquisition of Flybe by Virgin Atlantic would see it drop Avios and adopt Virgin Flying Club miles as its loyalty currency which is likely to be a minor negative.
Fun and games ….. let’s see how the situation unfurls over the next few days.
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