Virgin Atlantic unveils consortium bid for Flybe – to rebrand as Virgin Atlantic!

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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 (PDF).

I did an interview discussing the deal for LBC London News on Friday morning.  You can listen by clicking here (click here if you can’t see the player image):

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

Virgin to bid for Flybe

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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Comments

  1. Thomas Howard says:

    If the NQY-LHR route is maintained this could be the end of me collecting Avios, unless I emigrate to Canada. I’d find it infinitely easier to rack up tier points on that route than any other and every interaction I have with BA adds to my negative opinion of them.

    • It better be maintained, it’s moving from LGW to LHR in April for much better connectivity to not only the capital but international flights, it would be a great shame to have to end up going back through LGW but with it being subsidised by the tax payer, I don’t see it changing any time soon.

  2. Rob, re brand – I’m going to punt that the FlyBe services will be branded as Virgin Connect to ring-fence it from the VS long-haul brand.

    • I would have expected that, but the document does specifically mention “the Virgin Atlantic brand”.

  3. Genghis says:

    lol on the radio interview. “Rob Burgess runs the UK’s biggest frequent flyer website, Heads er, Head or points.com”

    • Also the summary that everyone wins is true for the new shareholders but rather less so for the existing ones!

      • Not really – you have to assume that the alternative was administration, probably caused by a sharp fall in forward bookings after the initial press speculation.

    • I think that might have actually been the audio jumping. Happened at a few other points too.

    • “head ‘or points” – as in cockney accent

  4. Lady London says:

    So to land on that Scottish island, on the beach, on Stobart Air, would mean using Virgin miles rather than Avios, in future?

    • Genghis says:

      Barra from Glasgow still operated by Logan.

      • Can you use avios on that flight to Barra?

        • Genghis says:

          No. Flights can be reasonably priced though.

        • No, not on any Loganair flights (it is no longer a Flybe codeshare).

        • Rob – you need to write an article before the summer on Barra with a proposed itinerary of when/how best to get there, what to do there and where to stay for a night or two and how to fly back. I heard that flight times vary and it could be difficult to plan it independently but if someone breaks the ice…

        • Genghis says:

          A few of us on here have done the trip. Perhaps an article of a few readers’ stories? I’d be happy to contribute having done the trip back end of 2017.

          • I am still hoping to do it. It fell through the cracks last year but is absolutely on my ‘to do’ list – and it’s not one I’ll be giving away to the new writer!

        • @Rob – great, will be looking forward to that and hopefully @Genghis and others will be able to add their experiences in comments to that article

      • Alex Sm – the runway is the beach so it only operates at low tide. I’d love to do the trip – need to get my act together and book it for the spring.

  5. Nick Burch says:

    Hopefully another chance for a Virgin Atlantic status match for BAEC cardholders taking a new domestic flight or two! 🙂

    I miss my matched virgin status from the little red days….

    • I tried this and they were inept at processing so it never happened. I think I tried 3 times when using little red.

  6. Interesting development.

    I don’t fly Virgin or collect flying club miles as next to useless for me being in ABZ. If they allow domestic connections via MAN or LHR to connect long haul like BA for redmptions this would certainly encourage me to use them.

    • I am also in ABZ and have held some Virgin miles for a while so i hope the domestic connections are included if this goes through. Exciting times!
      I have also used INV recently saving 450 on APD for a family of three.

  7. Am mystified that you wouldn’t want to see greater competition on domestic services. The issue for little red wasn’t that passengers didn’t want it was a question of scale. You need to run multiple regular flights not one a day. You also need to deliver what you promise. God knows BA have exploited their monpolistic grip on domestic services with reductions in service. Higher fares, dirty planes, and a cancel first attitude.

  8. I imagine a lot of people with flybe shares have been on a bit of an emotional rollercoaster of late.
    Probably not the outcome many expected after the news of the bids pre Christmas.

  9. Glasgirl says:

    One question (I couldn’t see this addressed anywhere so apologies if it was mentioned and I missed it) – if Stobart Air will be acquired by this new entity what happens to the old Aer Arran route connections between the UK and Dublin/other Irish airports? Aer Lingus is so handy with the Stobart operated GLA-DUB hop and customs preclearance in Dublin :-/

    • Good question – they’re very handy for starting ex-DUB trips!

    • Good question. Hard to see IAG using a Virgin business, but are there many alternatives?

    • The new CityJet & Air Nostrum joint business have already said they’re working on a proposal for operating the Aer Lingus Regional services. The current contract apparently ends sometime this year.

  10. Rob,
    Why do you say Flybe has punctuality issues, when it has better punctuality than Virgin or BA according to Flightstats? https://www.flightstats.com/company/media/on-time-performance-awards

    • Long-haul punctuality is different to short-haul punctuality. It is an issue for them, although it has got a lot better recently.

      • The FlyBe schedule has more padding than Joan Collins’ jacket shoulders. They are either near enough on time or horrendously late IME.

  11. Mikeact says:

    So, which routes are likely to be canned going forward ?

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