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.
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.
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 …..
How to earn Virgin Points from UK credit cards (September 2023)
As a reminder, there are various ways of earning Virgin Points from UK credit cards. Many cards also have generous sign-up bonuses.
You can choose from two official Virgin Atlantic credit cards (apply here, the Reward+ card has a bonus of 15,000 Virgin Points):
SPECIAL OFFER: The sign-up bonus on the Virgin Atlantic Reward+ Mastercard is doubled to 30,000 Virgin Points if you apply by 2nd October. You receive 15,000 Virgin Points with your first purchase and a further 15,000 points if you spend £3,000 within 90 days. Apply here.
You can also earn Virgin Points from various American Express cards – and these have sign-up bonuses too.
American Express Preferred Rewards Gold is FREE for a year and comes with 20,000 Membership Rewards points, which convert into 20,000 Virgin Points.
The Platinum Card from American Express comes with 30,000 Membership Rewards points, which convert into 30,000 Virgin Points.
Small business owners should consider the two American Express Business cards. Points convert at 1:1 into Virgin Points.
(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.)