Virgin Atlantic Steps In to Save Flybe

The takeover comes two months after the airline put itself up for sale

Stobart is part of a consortium led by Virgin Atlantic Airways and including Cyrus Capital Partners that said on Friday it will buy Flybe for $2.8 million (2.18 million pounds), aiming to rebrand the struggling regional carrier.

"The industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit", Christine Ourmières-Widener, chief executive of Flybe, said.

The joint venture said the offer price comes after "careful" due diligence, taking into account Flybe's capital needs, its hard trading environment, and prevailing market conditions.

The combined group will also operate independently to Virgin Atlantic under one management team, and will be 40 per cent owned by Cyrus Capital Partners, with Stobart Aviation holding 30 per cent, and 30 per cent by Virgin Atlantic Limited.

Flybe operates routes from about 25 British airports, including domestic connections to London's Heathrow.

Stobart Group will contribute Stobart Air and Propius, Stobart's aircraft leasing business into Connect Airways.

Connect Airways has pledged a £20 million working capital loan to support operations and an £80 million investment.

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"In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM".

Flybe's October profit warning wiped £20m off its market capitalisation, while its 48p share price in March 2018 had shedded value to hit just 11p in November, before interest from larger airlines helped push it up to 16p. "At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows".

Stobart will contribute the assets of Stobart Air rather than any cash in exchange for its stake in Connect, which will inherit Flybe's £100m of debt.

"Such a combination would be a compelling proposition with a comprehensive regional network in the United Kingdom and Ireland, coupled with an enhanced European footprint, providing greater choice and connectivity for customers to travel to destinations all over the world", it added.

For Stobart Group, which had already run the slide rule over Flybe a year ago, the deal gives it scale to compete in the European short-haul market and to grow passenger numbers at Southend airport.

Shai Weiss, chief executive of Virgin Atlantic, added: "We are pleased to have this opportunity to partner with Stobart Group and Cyrus to bring Virgin Atlantic service excellence to Flybe's customers".

Stobart owns London Southend Airport and previous year secured a significant coup when it announced that Ryanair will establish a base at the gateway from this summer, operating 13 routes to eight countries.

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