Maximise your Avios, air miles and hotel points

Is Flybe on its way back to the skies?!

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

If you thought the Flybe story was over, think again.

The Telegraph reported on Sunday that EY, the administrator of Flybe, had opened talks with the Government over the nationalisation of the airline.

This story was denied by EY.  According to a statement given to CityAM:

“At this time, we can confirm that there are no discussions between the joint administrators and government about taking Flybe out of insolvency.  [EY] continues to be open to approaches from all parties in order to realise returns for creditors”.

One of the emergency coronavirus measures announced by the Government last week was a change in the laws relating to company insolvency.  Akin to the US Chapter 11 scheme, it allows companies to continue trading even if they are technically insolvent and is aimed at ensuring that previously healthy businesses should be protected.  Importantly, these changes were backdated to 1st March – and Flybe collapsed on 5th March.

Is Flybe on its way back to the air?!

If the Government chose to acquire Flybe from the administrator, it could immediately rehire (to keep in place) and then furlough staff using the new Coronavirus Job Retention Scheme.  The company would also be able to access some of the emergency funding that has been made available to businesses.

This does, of course, open up a h-u-g-e list of questions:

How much of the old Flybe team could be put back together?  Very few of the staff will have found new jobs yet, I imagine.  How easily can you put an airline back together working from home though?  

I would imagine that the aircraft would be available ….. they won’t have been leased to new operators yet given current demand.

Could the Heathrow slots be taken back from British Airways?

Would a Government-owned Flybe look to compete on those routes which have been taken over by other airlines?  And presumably these were the most profitable ones?

I genuinely struggle to see how this would work.  It would be great if it could, of course, but I am tempted to believe EY when they say that there is no deal under discussion.

One unknown is the position of Loganair and Eastern.  Both are believed to be on the verge of submitting their own requests for state aid.  Could the Government look to bolt these two carriers together, as well as providing finance to pick up more ex-Flybe aircraft and routes?  But if it did, are we not repeating the story of how Flybe was put together in the first place?

The key question, of course, is why the Government would want to help Flybe when it refused point blank just a few weeks ago.  Flybe was also not brought down by coronavirus – the virus was simply the final punch at the end of a multi-round fight.  I think we need to file this one under ‘not going to happen’.

The original story was in the Telegraph but is behind a paywall.   Here are summaries in TTG and CityAM.

Comments (52)

  • J says:

    Flybe may not have been profitable in itself but there’s economic value in regional connectivity. If you leave everything to the market there’ll be gaps – easyJet/Ryanair have no interest in adding any smaller regional aircraft to their fleet. It makes sense to offer govt aid to Loganair and Eastern and in the long term it might offer better value to bring them together. All this talk of state aid being a throwback to the 70s is absurd, if it wasn’t for government subsidises there wouldn’t be a railway network. And every major, successful airline in the world right now is taking state aid or will be soon.

    • ADS says:

      surely a much easier solution would be offer more Public Service Obligation grants – and let FR/EZ/whoever bid ?

    • Aston100 says:

      Woah, is that genuine?

    • Lady London says:

      So the largest shareholder wants a rights issue, which he easily has deep pockets to meet, and thus diluting other shareholders?

      I had reached the conclusion equity was still a good bet given the sound underlying business and was planning to resist any suggestion to take bonds however excellently paying they might be. Seems like SHI has the same faith in Easy. I wonder which Corporate Finance houses are behind each side. Or have I misunderstood?

      • Rob says:

        The other shareholders are mainly pension funds so their pockets are deep enough. His biggest concern seems to be seeing his stake forcibly diluted if the Government takes a stake as part of any bailout.

        easyJet is acting like it is a lot weaker than its published numbers suggest, which might be driven by the Airbus payments.

        • Is your body beach ready? says:

          Stelios is smart and correct to focus on incompetent (or worse) Directors

        • Lady London says:

          Clever, though.

          I was not clever enough to see as you pointed out Rob, that it was a defensive parry against any deal that would see govt taking shares.

          The Airbus thing is good for a go because every other airline will be doing it. The hint about corruption – not even subtle but stopping short of libel is just to get their attention.

          Gives me confidence in that company coming out better than most.

  • ChrisC says:

    I wonder how many people who are against taxpayer suport for say flybe on the basis of enhancing regional connectivity are also against tax payer support for the train operating companies of approx £500m per year (support for network rail and HS2 etc is over and above that)

    • mvcvz says:

      I am.

      • J says:

        Do you live in the South East?

        • Nick says:

          Are you also in favour of removing the billions of pounds in taxpayer subsidies for the road network as well?

          • mvcvz says:

            Nowhere near the southeast. I have the misfortune to travel to London and back by train for work 2-3 times a year. Despite being in first class, it’s invariably a hideous experience.

            As for roads, if all the tax I’ve paid in fuel duty, road fund licence etc over the years had been used to support the road network, then no taxpayer subsidies would be required.

          • J says:

            @mvcvz not true despite what you have read in the Sun. The motorist has been heavily subsidised over the years and even now vehicle tax and duties do not take account of all of the costs to society. So you don’t like trains and you don’t see the point in regional flights but you like your car. Got it.

          • mvcvz says:

            I love my car thanks. Even though I’ve been able to drive just 12 miles in the new one I bought a fortnight ago due to current lockdown. Just pleased I can work from home. I do not, however, accept for one moment hat the motorist has been subsided to a higher level than train/regional flight users.

            I never said I didn’t see the value of regional airlines, so please don’t put words in my mouth. I just don’t subscribe to the “private profits, public purse losses” version of capitalism.

            And please also don’t make inferences as to my newspaper preferences. Dickhead.

  • Chu says:

    How well run are government owned airlines normally? I’m not talking about the Middle East where they have unlimited oil money to sink into a passion project of like semi-Singapore Air where the country has enough savings to back it up.
    For a place like the UK, I find it hard when a deficit seems likely for the coming decade and any significant investment would likely be barred.
    RBS was nationalised for a while and I can’t see that it’s improved the “quality” of the bank or the customer experience.
    I’m all for saving jobs but would love to hear some 2 cents from people who know more than me about whether they could make companies better.
    My gut feel is…a U-Turn is happening because ultimately, they’re going to have to bail out the rest of the industry.

    • Rob says:

      Finnair is 55% (?) Government owned and they have done exceptionally well in recent years – new A350 fleet, carving out a distinctive niche into Asia etc.

      On the other hand, TAP Portugal has been transformed since it was privatised in 2016 with an entirely new long-haul fleet lauched in the last 12 months and some very aggressive pricing as we’ve covered. Iberia has also been transformed since IAG took it over.

      All of the US airlines are technically underwritten by the Government.

      • Chu says:

        Thanks Rob,

        So it is a bit of a mixed bag in terms of whether the quality for the customers actually work.
        Finland isn’t exactly a poor country and just worries me that it’ll just become another elephant in the room or ammo for politics later down the line.

        It is interesting though, and if more become government owned, it’ll also be interesting whether they’d end up consolidating and merging the brands.

  • Chu says:

    Starting some new discussion?
    I’m an Aussie that works in the UK – and my family in Sydney have been sharing the news about people being quarantined in the hotels on state funds (Hilton, Swiss, etc) – they’re obviously not bad hard products but it’s also true that they’re not getting the typically paid 5 star service (let alone being let out).
    A lot of those being kept in isolation are complaining about the facilities and also food, no doubt they are not excellent food being supplied, but what I’m trying to get a better sense of is whether majority of these people have the right to complain. Are most people being sent home and needing quarantine:
    – People who refuse to cancel their holiday plans, and then are stuck?
    – Geniune people helping others and have been stuck?
    – Stuck on a cruise ship and went on the cruise ship knowing about tlhe coronavirus?
    I know the same is happening for people being flown back to the UK as well – I’m not sure whether to feel sympathy for them or not given that most sensible people have cancelled their travel plans at their own cost prior to this.

    Also, a fun note, if you’re stuck at the Hilton, do you think you get the eligible nights benefits? 😛

    Stay safe everyone.

  • Wilbur says:

    If they do take over the airline will all my flights be re-instated. Lost hundreds of pounds. I have to commute to and from my place of work. No other airline has picked up the routes. I work in construction, at the moment work on to very important nhs projects and it is very difficult to get back home to my family.