LONDON—Pilots’ union BALPA is calling for urgent talks with UK regional flybe, after reports that the airline’s future could again be in jeopardy.
The development comes less than a year after flybe’s operations were acquired by a consortium including UK long-haul carrier Virgin Atlantic.
On Jan. 13, Sky News reported that flybe has been seeking additional financing amid mounting losses, with an accountancy firm on standby in case flybe Group has to enter administration. Citing sources, Sky News said the UK government has been briefed.
Pilots’ union BALPA voiced anger over the Sky News report and called for immediate talks, as the situation could affect up to 1,500 flybe jobs.
“According to reports, the airline could have collapsed over the weekend, which would have been devastating news. This is an appalling state of affairs and we demand that the owners of flybe—Virgin, Stobart and Cyrus—and the government departments involved stop hiding and talk to us about flybe,” BALPA general secretary Brian Strutton said:
Flybe declined to comment on the report. “Flybe continues to provide great service and connectivity for our customers while ensuring they can continue to travel as planned. We don’t comment on rumor or speculation,” the airline said in a statement, Jan. 13.
Virgin Atlantic also declined to comment on the Sky News report. “We are not commenting on speculation,” a Virgin Atlantic spokesman said.
Europe has seen a string of airline failures over the past year, including the high-profile collapse of leisure airline Thomas Cook in September 2019, making the situation politically sensitive. Flybe is one of Europe’s largest regional operators, carrying over 8.6 million passengers in 2019.
Flybe’s operations were controversially acquired in February 2019 by the Connect Airways consortium, made up of Virgin Atlantic, transport and infrastructure investor Stobart Group and investment fund manager Cyrus Capital Partners. Connect Airways is 40% owned by Cyrus, 30% by Stobart and 30% by Virgin Atlantic.
The acquisition secured EU competition clearance in July 2019, paving the way for Connect Airways to take management control of both flybe and regional aircraft franchise operator Stobart Air, under the leadership of former Virgin Atlantic executive Mark Anderson. At the time, the partners said the acquisition would “secure flybe’s long-term future,” with “strong financial backing” from Virgin Atlantic, Stobart Group and Cyrus.
Cyrus Capital Partners and Stobart Group had not responded to Aviation Week’s request for comment as this article went to press.
For years, Virgin Atlantic has been seeking short-haul feed to support its all-long-haul operation. A tie-up with former UK network carrier bmi was mooted for years, but the airline was ultimately acquired by Lufthansa and sold on to be wrapped into International Airlines Group (IAG) carrier British Airways (BA).
Virgin was hoping to use flybe as a fresh opportunity to fill this connectivity gap, rebranding the airline as Virgin Connect. In November 2019, flybe announced plans to add seven new routes for summer 2020, extending the airline’s network to 104 routes and 2,500 weekly flights.
However, aviation consultant and Altair Advisory managing director Patrick Edmond told Aviation Week that flybe is still battling with internal overcapacity in a highly competitive market.
“The fleet is too big. Despite valiant efforts to right-size after a previous management’s overexpansion, flybe is still over-dimensioned for its shrinking market niche,” Edmond said.
Flybe’s market is being eroded as LCCs pick up on profitable short-haul routes, Edmond said, while longer leisure routes are not sustainable on flybe’s smaller Embraer E-Jets and De Havilland Q400s.
Edmond also questions the strategic fit between flybe and Virgin. “There has been talk of feeding Virgin Atlantic long-haul at Heathrow and Manchester. But it’s unclear where any Heathrow slots might come from, this side of a third runway, and feeding a Virgin hub at Manchester would require there to actually be a Virgin hub at Manchester.”
Flybe has a relatively limited Heathrow operation. The airline did not serve Heathrow—Virgin’s biggest hub—until 2017, when it acquired remedy slots which IAG was forced by the European Commission to divest when it acquired bmi.
These slots have enabled flybe to develop strong Scottish links to Edinburgh and Aberdeen—two of the key routes formerly operated by Virgin Red, the last failed attempt by Virgin Atlantic to crack the UK domestic market. Virgin Red, which operated Airbus A320s wet-leased from Aer Lingus, ceased operations in 2015 due to lack of demand.
Edmond added that flybe’s problems will likely be compounded by news of the airline’s instability. “I would say that forward bookings will have fallen off a cliff in the last 24 hours and recovery from that will be exceptionally hard,” Edmond said.
Warwick Business School professor Loizos Heracleous also observed that flybe may find it difficult to find fresh funding in the current climate.
“Reports that flybe is seeking a fresh rescue deal come in the wake of numerous European airline failures, including airberlin, Monarch, Flybmi and holiday firm Thomas Cook. Attracting new finance will be no easy task,” Heracleous said. “There will undoubtedly be more bankruptcies. For example, in 2017 we saw 79 new airlines enter the market, while 25 went bankrupt. The failure rate was even higher in Europe, where 29 airlines were started and 14 went bankrupt. In the medium- to long-term the European aviation industry may move towards higher levels of consolidation where the weakest players get weeded out or taken over.”
The UK CAA oversees the financial health of UK airlines and handled the huge repatriation of stranded passengers after Thomas Cook’s collapse. A UK CAA spokesman declined to comment on the flybe report, saying: “We do not comment on the financial situation of any of the organizations we regulate.”
The GMB union, which represents flybe ground handler Swissport, also voiced its concern and called for government intervention.
“If Flybe goes belly up, it won’t just be direct employees at risk but 1,400 supply chain jobs as well,” GMB national officer Nadine Houghton said. “If government is serious about infrastructure investment in the regions, it must step in and protect what already exists.”
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