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Virgin Atlantic unveils consortium bid for Flybe

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A Virgin Atlantic-led consortium, Connect Airways, has announced its recommended bid for Flybe.

The offer is at just 1p per share (they were trading at 16p on Thursday) but it comes with a promise of a £100m cash injection.

The deal has been recommended by the Flybe board, but other suitors are free to make counter proposals. No major shareholders had given irrevocable acceptances in advance.

The full offer document is here.

Virgin to bid for Flybe

How is the deal structured?

This is a complex deal but, at the same time, there is a certain logic to it.

It is a three-way bid comprising:

  • Virgin Atlantic (30%_
  • Stobart Group, which is contributing assets but no cash (30%)
  • a US private equity group, Cyrus Capital Partners (40%) which previously backed Virgin America

Stobart Group will be injecting its Stobart Air business into the new company.  This already operates some Flybe routes under franchise and was formed from what used to be Irish airline Aer Arann.  You may remember that Stobart Air was publicly considering a bid for Flybe in 2018 but did not go ahead.

Stobart Group also owns London Southend airport and the offer document talks of the new airline building a strong presence at Southend.

Virgin Atlantic gets to protect its codeshare operation which was feeding a lot of business to Virgin’s Manchester hub.  Virgin is under huge pressure at Manchester from Thomas Cook and it can’t afford to lose connecting Flybe passengers.

Virgin will, presumably, also get first dibs on the Flybe slots at Heathrow.  The use of these slots is restricted, but they can soon be used for any European destination, Moscow, Cairo or Riyadh.  What Virgin will NOT be doing, hopefully, is trying to feed its Heathrow services with domestic connections, because only Terminal 2 and Terminal 5 can handle domestic flights and Virgin Atlantic is in Terminal 3.  The story of Little Red is that passengers don’t want to do this.  (Whilst BA is split between T5 and T3, the routes out of T3 are those with the lightest connecting traffic.)

I am in two minds about the wisdom of using the Virgin Atlantic brand on Flybe, given the punctuality issues and small aircraft used.  It will not necessarily have a positive halo effect on the core operation and it is difficult to see how they can ‘Virgin-ify’ it.

Virgin Atlantic acquisition of Flybe with Stobart Air

Because this is a consortium bid which will require the airline to operate on a stand-alone financial basis from Virgin Atlantic, Flybe will presumably retain its operational identity.  There is likely to be a new board but it should be business as usual for the rest of the staff.  The offer document says that the Exeter and Dublin (Stobart HQ) offices will remain.

This is clearly the end of using Avios as Flybe’s loyalty currency.  As Flybe is to be rebranded under the Virgin Atlantic brand it is clear that the new airline will be offering Virgin Atlantic tier points and Virgin Flying Club miles.  It will also be the end of Avios redemptions on Flybe.

More as we get it …..

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Category

Virgin Atlantic and Flying Club

Comments (81)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Chris says:
    11 Jan11 January 08:11

    No VA not majority shareholder as had been expected?

  • TripRep says:
    11 Jan11 January 08:11

    Great news!

    Bit confused by this statement…
    “What Virgin will NOT be doing is trying to feed its Heathrow services with domestic connections, because only Terminal 2 and Terminal 5 can handle domestic flights and Virgin Atlantic is in Terminal 3.”

    So what about the FlyBE connections from ABZ & EDI to LHR?

    • TripRep says:
      11 Jan11 January 08:13

      Why can’t pax just connect to a different terminal?

      eg BA Miami lands at T3, T5 is domestic for BA

      • Rob says:
        11 Jan11 January 08:15

        Passengers clearly can do it but won’t like it. The BA routes in T3 are those with the least connecting traffic.

        • LewisB says:
          11 Jan11 January 08:19

          As somebody who regularly chooses KLM for connecting flights from the UK regions, one of the main appeals is the very easy transfer in AMS. On paper switching from Terminal 3 to Terminal 5 at LHR doesn’t sound appealing at all.

          • Alan says:
            11 Jan11 January 20:37

            The particular annoying bit when arriving on a domestic connection is T5-T3 where you end up having to re-clear security, rather than T5-T5. Of course easily sorted by just having a bus meet the flight for connecting pax and dropping them post-security. Could make for a really nice service!

        • TripRep says:
          11 Jan11 January 08:27

          Believe me, it’s better than no service north at all.

          At least it’s a code share, bags checked through + EU261, just a longer connection needed, and an opportunity to try out the Virgin arrivals lounge.

          • Alan says:
            11 Jan11 January 20:38

            Would be esp good if it meant return of connections for redemptions. Currently you still have to switch terminals but luggage isn’t checked through and no protected connection. Even without dedicated bus it’d still be an improvement.

        • Jim says:
          11 Jan11 January 08:30

          I don’t think you can speak for “all” passengers, Rob.

          I was very happy with the EDI Little Red service, connecting T2 to T3 for onward VS flight.
          The transfer was easy.
          T2 is such a nicer and more efficient terminal than T5, for the return too.

          I’m due to take a FlyBE to VS transfer in LHR in a couple of months, and again, am quite happy not to be going BA.

          Yes, the volumes and profits couldn’t make it work with Little Red, so they ended the service, but the passenger feedback from those who DID use it was very high.

          • Alan says:
            11 Jan11 January 20:39

            Totally agree, I found it very nice and was just annoyed it had gone by the time I did a VS UC redemption. A friend that had done it a year prior said it worked really well.

        • Vasco says:
          11 Jan11 January 08:47

          I’ve had to do T3-T5 connections in the past, and I hate that bloody bus. The last time I had a few hours, so went landside and took the tube. It was much better.

        • Chris L says:
          11 Jan11 January 10:22

          I’m sure there is a solution to the T3 domestic issue. T2 and T3 are not far from one another so maybe there is scope for some sort of fast airside connection. WIth the addition of Newquay, Flybe operate 28 flights per day to and from LHR – surely there comes a point where an investment can be made in improving the infrastructure for domestic flights, especially with LHR under political pressure to offer more domestic flights as the airport expands.

          Don’t forget also that Virgin Atlantic are partnering with Air France/KLM. Flybe operate a lot of services to CDG and AMS, so there’s potential for better connections with long haul Air France and KLM services.

        • Andy S says:
          11 Jan11 January 20:49

          Even T5-T5 requires re-clearing security, which can be a right pain in the a*se! I don’t see why once you’re airside you can’t stay airside. You must have been through some security somewhere to get there!

          • Alan says:
            11 Jan11 January 21:22

            Not when connecting from T5 Domestic though – BP scan then up the escalator straight into the departure lounge/shops:)

    • sunguy says:
      11 Jan11 January 10:47

      I was also quite happy with the Little Red service to/from Edinburgh – a nice change from BA and helped keep BA prices somewhat stable … it was a pain when the service closed….

      Im not sure how much VS competing on domestic routes as flybe is going help – but maybe, just maybe they can indeed virginify the service and make it succesful for both feeder and domestic pax alike!

      • Andrew says:
        11 Jan11 January 11:44

        Certainly useful – and much handier for my preferred “Flightpath” car park than T5.

        It needs a different mindset this time. The bread & butter of this route is the EDI and Fife/Central Scotland market to London & Thames Valley – connecting international traffic is a nice extra.

        I’m price sensitive with my travel so will happily flirt between BA, Flybe, VTWC and LNER. Colleagues who are doing the domestics week in week out, are mindful of their status and access to the Heathrow and EDI business lounges – although many of them were forced converts from BMI.

        An alternative to BA that’s as good as BMI was would be a change for the better.

  • ah says:
    11 Jan11 January 08:24

    I would have no problem connecting through another terminal. Would save me 5 hours of driving, paying for silly priced parking & probably an overnight stay.
    Small inconvenience to pay!

    • Anna says:
      11 Jan11 January 17:42

      +1. There is a fair bit of traffic from MAN to MIA via T5 and T3 as there are no direct flights now and people are even using MIA as an alternative to the outrageously priced Orlando routes.

  • Sam G says:
    11 Jan11 January 08:26

    I commented on the other thread that I could imagine them offering the bus from the aircraft at Heathrow (and Manchester?) the same as they did with Little Red – even more so if it’s Virgin Atlantic branded to keep connections seamless

    But looking at the current FlyBe timings though not sure how useful it would be – most flights arrive in the evening after US flights have left. Perhaps for the morning flights but then it’s more complex to advertise the service.

    • Jim says:
      11 Jan11 January 08:35

      EDI -> LHR

      0615 0800
      0845 1020
      1120 1255
      1430 1605
      1820 1955
      2045 2220

      ..with some timings changes over the summer, but broadly similar.

      A fair choice of flights, I feel. Earliest to get same day. Evening for a night stop-over on bath road, and an early VS clubhouse and US flight.

  • TripRep says:
    11 Jan11 January 08:39

    This also potentially puts INV-MAN-USA on the table for tax free (APD) redemptions. Very attractive for Northern Scottish travellers.

  • Neil says:
    11 Jan11 January 08:39

    Surely Flybe must now switch to Flying Club – It would make perfect in line with the KLM partnership.

    • Rob says:
      11 Jan11 January 09:33

      With the branding change it is a 100% certainty. Hope they keep Oliver on – he just moved his family down to Exeter after leaving Avios.

      • Adam says:
        11 Jan11 January 10:03

        I agree, it would be shame if they didn’t. But as they are keeping the operational presence in Exeter then hopefully a local loyalty presence is still needed.

      • Neil says:
        11 Jan11 January 12:02

        Ouch, that would be harsh for Oliver. Bring on another redemption partner for Uk Flying Club members. Hopefully the taxes won’t be too high.

  • Steve R says:
    11 Jan11 January 08:40

    OT the 10k bonus for the Life Assurance has just landed -time to cancel

    • AndyW says:
      11 Jan11 January 09:02

      So they have. Anyone remember the rules regarding how many payments we needed to make, just want to make sure I don’t cancel and they claw them back.

    • Oh Matron! says:
      11 Jan11 January 09:50

      Weirdly, my balance has increased by 10K but I can’t find it in my history. Good catch though 🙂

      • Vivian says:
        11 Jan11 January 10:37

        same here! and I’ve only made 4 payments so far.

        • Jonathan says:
          11 Jan11 January 10:55

          Don’t cancel till you’ve fulfilled the T&C’s & made 6 payments. Virgin are known for clawing back miles months down the line

      • Alan says:
        11 Jan11 January 20:42

        Exactly the same here – VS FC website can be weird like this sometimes. I called them yesterday after seeing it mentioned in the comments, in fairness they just called me back this evening – they’d spoken to marketing dept and promise points would be in my account my Mon night. Only then noticed balance had increased with no corresponding activity (in summary or detail). Will see what happens by Mon. AwardWallet at least gives you the nice graph of previous balances!

        • Genghis says:
          11 Jan11 January 20:57

          VFC orders by activity date, not posting date. Check back to June 18.

          • Alan says:
            11 Jan11 January 21:25

            Had already done that, I’d set it to show the last 20 transactions so was way back to April but scanning down couldn’t see any 10k txs – hadn’t realised they’d posted as 7.5k+2.5k though!! Before their website revamp it used to display better.

    • Grant says:
      11 Jan11 January 10:05

      I assume this offer is no longer running?

  • JimA says:
    11 Jan11 January 09:35

    I find the Europe/Moscow/Riyadh/Cairo limitation on slots intriguing Are there other slots with limits ? Is this historical reasons or other ? who imposed the limits? so who could change them

    • Andy says:
      11 Jan11 January 09:44

      I think they were ex-BMI slots that BA had to give up on it’s acquisition of BMI. Any other airline could take them up if they were utilised to former BMI destinations…i think haha

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