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What can we learn from the Flybe administration report?

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Flybe went into administration on 28th January – here is our article from that day. Whilst no-one doubted that the company would be struggling, given the lower yielding Winter season and the fact that domestic Air Passenger Duty wouldn’t be cut until 6th April 2023, the speed of the demise came as a shock.

Interpath, which is acting as administrator to recover what value it can for creditors, published its initial findings last week – click here (PDF).

There are some interesting titbits in there about the condition of the airline.

Flybe administration report

Flybe was operating to 17 cities at the time of its demise, using a fleet of nine aircraft. The company employed 279 people when it closed. As of last week, this had dropped to 10 people.

The shareholders, a company led by private equity group Cyrus Capital (which had also invested in the original Flybe), initially invested £45 million in the company as a mixture of equity and loans. This was expected to see the business through to breakeven.

The airline originally planned to have 17 aircraft, but suffered from delivery delays and had only two available aircraft on the day it launched. Ongoing delays led, as we reported at the time, to multiple route cancellations, sometimes just days before new routes were due to launch. The ramp up in services was also hindered by covid restrictions in early 2022.

A further £24 million was injected by the shareholders in August 2022, but by this time the business was losing between £4 million and £5 million per month.

The shareholders tried to find a new partner or sell the company. When these plans fell through there was no choice but to place the airline into administration at 3am on 28th January, a time when all aircraft were on the ground.

Post-administration, attempts were made to sell the company to the only interested buyer (not named, but believed to be Air France KLM) but terms could not be agreed.

Flybe administration report
Flybe launch day

The airline had to be sold via a share sale in order to retain the landing slots at Heathrow and Amsterdam. When the decision was taken to wind down the business, the Heathrow slots reverted to British Airways and the Amsterdam slots reverted to the Dutch slot allocation authority, which has given them to US carrier JetBlue.

Here is exact wording on the slots:

As noted above, there were a number of challenges for Flybe to retain its rights to its slots and to ultimately realise value for them. Unfortunately, the slots at Heathrow which were highly prized in the industry were not Flybe’s to sell or transfer – they were held under an agreement with BA through a European Commission-decreed arrangement. Those slots reverted to BA once they were in jeopardy of the use-it-or-lose-it rule in the absence of a buyer for the Company emerging. Similarly, Amsterdam slots are subject to the rules of Airport Coordination Netherlands, who were unwilling to agree a transfer absent the sale of the Company and its Operating Licence, or a similar substantial transfer of the Flybe business. No offers were received for the airline’s slots, and they were returned to the pool by the relevant slot coordinators.

As happened with the liquidation of the original Flybe, creditors are losing out to shareholders. That said, the report makes clear that many suppliers did not have confidence in the business and had been insisting on advance payments or deposits.

Because Cyrus Capital invested much of its money in the form of a secured loan, it has higher priority than unsecured creditors. The estimated £8 million remaining when the administration is complete will go to the shareholders, with unsecured creditors to be wiped out apart from a ring-fenced £800,000.

The total net deficiency (ie the amount of money that would be required to repay all external creditors plus fully repay the debt and equity injected by the shareholders) is £82 million.

You can read the full report here (PDF).

PS. Interpath, as administrators to Flybe, have charged an average of £689 per staff member per hour for their time to date, with the most senior staff charging over £1,000 per hour.

Comments (31)

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

  • The real Swiss Tony says:

    That PDF is fascinating. £2.4m worth of unpaid EU261 claims, almost a million pounds in APD owing to HMRC…

  • Hbs1624 says:

    Flybe is in Administration not receivership – big difference!

    Administration is very expensive as they have to take over the company. I’ve worked on a number in my time and it will be rare to get change from £1m of fees from the admin even on a small simple Administration.

    That £2.4m estimate will go up to say £3m so even the secured creditor won’t get all their money back after the prescribed part of £800k.

    • SydneySwan says:

      It is rare to get change out of a million because the fees are so ridiculous – pure and simple.

    • Bagoly says:

      Cashiering–- processing receipts, payments and bank reconciliation
      Estimated average hourly rate (£) £518.78

      That really is taking the mickey.
      The problem is that Administrators report to the creditors as a whole, which means effectively to nobody.

      It’s almost as bad as appointing a solicitor as executor in a will – nobody can control the costs.

    • Bagoly says:

      Hourly rates:Managing Director 1060
      Director 980
      Senior Manager 870
      Manager 700
      Senior Administrator 510
      Administrator 375
      Support 175

      “Support” is probably on little above minimum wage.
      Senior Administrator might be on £60k per year, i.e. £30 an hour.

      • QFFlyer says:

        Indeed, a lot of these “rates” will be made up of overheads and other on-costs like NI & pension contributions, head office costs (and other divisions/staff which don’t generate any direct income, such as HR, for example), etc..

        • Blenz101 says:

          Yes. That’s how all professional services hourly rates work.

          The point here is that in a competitive market you could get a partner working at an international law firm based in a UK regional office (Manchester/Bristol/Leeds) for the same £375 per hour being charged for an administrator.

      • Joe says:

        £510 an hour is approximately what I would charge if I were in private practice as a lawyer (I’m in house) – on a salary of more like £200k than £60k.

        Those fees are an outrageous rip off.

    • Chris W says:

      No, its expensive because they charge fees around 10 times what that person is actually being paid.

      The Administrators goal is to get in, rack up as many fees as they can and then get out.

      • Nick says:

        I always remember the annual audits at one of the companies I worked at some years ago. The audit company ‘manager’ turned up once, on a Friday, for a couple of hours, then took the only other staff, largely interns, or very junior staff, out for lunch. All the interns did all day was hog the photocopier and do a couple of documemt trails. Net result, thousands paid in fees (including, no doubt, a nice lunch too!).

  • Neal says:

    Seems no one works at a professional services firm on here.
    That’s the going rate in the market, doesn’t matter if it’s PwC, Deloitte, EY or Interpath (ex KPMG)…

    If you are outraged by those rate wait and see what IB bankers charge…

    • Joe says:

      I do – that ratio of hourly rate to salary is not normal.

      People normally earn say 400-500 hours at their billable rate. Here it is 100, which suggests they are charging way too much, if paying their staff way too little.

      • Joe says:

        Or paying*

      • Ric says:

        Depends on the service line. Restructuring is short notice, so lower staff util and higher fees. My service line averages £250-400 per billable staff hour on average. Audit is much lower given recurring client audits and higher util.

  • David Starkie says:

    And the ethical aspect?

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