LONDON — Exeter-based regional carrier Flybe will go on-sale following rising costs of fuel, increased competition, and the volatility in currencies sparked by the imminent BREXIT.
A report by Sky News states that Europe’s largest independent regional carrier will be putting itself for sale via the London Stock Exchange, hoping to attract a potential bidder that will take over or merge it with a competitor.
Reports state that the airline, today, is valued at around GBP £25 million, about 90% less than what its stock value listed in 2010.
Directors at Flybe reportedly concluded that a takeover is the best option in order to return back to profit.
The airline, which carries more than eight million passengers per year between more than 80 airports across the UK and the rest of Europe, has already cut hundreds of jobs and closed unprofitable bases.
The UK regional carrier, founded in 1979 as Jersey European Airways, currently boasts a fleet of 78 aircraft. However, it has promised it would phase out some planes and cut capacity even further to focus on its most popular and profitable routes.
Back in May this year, the airline outlined a new strategic plan regarding their fleet of Dash 8s and Embraer aircraft.
As Europe’s largest regional airline, Flybe had concluded that the Bombardier Q400 was “the best core aircraft for its current and future needs” and added that the aircraft would remain as “the backbone of the Flybe fleet for the foreseeable future”.
Christine Ourmieres-Widener, Flybe’s CEO, recently said that the airline’s current focus at the moment is to reduce its costs against the “headwinds of currency and fuel costs”.
It is unclear which carriers are interested in a takeover.
However, Stobart Air, which owns London-Southend Airport, has in the past expressed interest in Flybe. However, the group abandoned the bid earlier this year.
Even though Flybe’s revenues had increased to £752.6 million during the first half of 2018, the airline is expected to hit full year-losses of up to £22 million.
Since October 16, the group’s share prices have fallen from £32.20 to £11.50 per share.
Regional operations have taken place by Flybe since 1979 so for the carrier to go under if no buyer is found would be a shock to the UK market.
Released Half-Year Financials
November 14 saw the carrier release its half-year financials to the London Stock Exchange.
The carrier recorded a 1H18 profit before and after tax of £7.4 million, which is down from £16.1 million in 1H17. Revenues fell by 2.4% to £409.2 million (£419.2 million in 1H17) due to a 9% reduction in capacity.
Net debt increased to £82.1m including £70.6m cash (31st March 2018: £59.1m including £95.0m cash). Q3 is showing a positive improvement with 63% of seats sold (Q3 2017/18: 59%).
At the time of writing this, the share price for the carrier is up at 0.5% compared to market closure yesterday.
Yesterday recorded share price at £11.70 per share – now at £11.90 per share with a share offer price of £12.25 per share if anyone wants to take over.
As mentioned earlier, one of the reasons the carrier is struggling is through BREXIT and a weaker and volatile British pound. This is what it had to say in its financials regarding this.
“Brexit remains a major uncertainty for the sector and the wider economy. The Government continues to negotiate the UK’s exit from the European Union but has not yet reached an agreed deal.”
“In relation to aviation, the various Government papers on Brexit set out the issues facing the industry and failure to reach an agreement may put at risk, or damage, parts of the business.”
“The “no-deal” Brexit proposals give a 14 month stand off period, thus giving more time for consideration of alternative strategies and solutions if required.”
“The Board believes that an appropriate agreement will be reached, although it is also developing contingency plans including potentially reassigning contracts that could be directly affected.”Flybe’s 2018/19 Half Year Results via London Stock Exchange.
September 30 this year saw the fleet totalling at 78 aircraft compared to 80 back in March this year.
The carrier will be handing back a further two E195 aircraft to lessors by the end of 2H18, bringing the count down to 76.
The E195s have been seen as the more expensive aircraft to operate in Flybe’s fleet.
For more confidence in the Q400 program, the UK regional airline has extended the leases on five of its Q400 aircraft which immediately reduced rental costs on the aircraft.
This count will head back to 80 however, with four new Embraer E175s due for delivery in the July 2019/20 period.
Although it is a good thing the carrier is still in a profit, it is more the case of how long it will last.
The fact that Flybe are after buyers would suggest it needs investments urgently in order to boost profits back up.
It will be ultimately interesting to see whether Stobart Air, a carrier that has been interested in the past will go for the carrier or not, given how cheap it is on the market at the moment.
This is a developing story, stay tuned to airwaysmag.com for constant updates.