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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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You can choose from two official Virgin Atlantic credit cards (apply here, one has a bonus of 15,000 Points):

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(Want to earn more Virgin Points?  Click here to see our recent articles on Virgin Atlantic and Flying Club and click here for our home page with the latest news on earning and spending other airline and hotel points.)

Comments (82)

  • Graeme says:

    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.

    • GRIMZ says:

      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.

  • Paul says:

    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.

  • Rich says:

    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.

  • 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 :-/

    • Alan says:

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

    • Rob says:

      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.

  • Henk says:

    Why do you say Flybe has punctuality issues, when it has better punctuality than Virgin or BA according to Flightstats?

    • Rob says:

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

      • Stu N says:

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

  • Mikeact says:

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

  • Billy says:

    Flybe has recently been noted as the most punctual airline in Europe…

  • Hilary Sharman says:

    Is it safe to book with Flybe now for September flights from Exeter to Faro? I know that we can get refunds using a credit card but that leaves us at possibly a lot more expensive flights from Bristol for booking late. We love Flybe, what a shame!