Flybe collapses after last-ditch talks with government fail
UK airline failed to secure crucial £100m after coronavirus hit travel demand
UK airline Flybe has collapsed after months of talks with the government failed to secure a crucial £100m loan and the deadly coronavirus slashed demand, pushing Europe’s largest regional carrier into bankruptcy in the early hours of Thursday morning.*
Flybe confirmed it had entered administration after holding*last-ditch talks with the government on Wednesday afternoon, a move that puts more than 2,000 jobs at risk and raises uncertainty over many regional air routes within the UK.*
“All flights operated by Flybe have been cancelled with immediate effect,” the airline said in a statement.
“Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business,” the statement said. “This has been compounded by the outbreak of*coronavirus which in the last few days has resulted in a significant impact on demand.”
EY is handling the airline’s administration.*
The Financial Times revealed earlier on Wednesday that the government had rejected the idea of a £100m state loan to the airline. Meanwhile, Flybe’s management became increasingly concerned that any cuts to air passenger duty might not kick in until 2021, which would be too late for the airline to survive the coming months.*
While Flybe initially had enough money to see the airline past the UK Budget next week, the impact of coronavirus on bookings has “sped things up”, according to one person with knowledge of the matter.*
“The impact of coronavirus has made a bad situation worse,” said another person close to the airline. “It has been in a pretty precarious position for a while — it doesn’t take much to push it over the edge.”
The airline was taken over by Connect Airways — a consortium of Virgin Atlantic, Stobart Aviation and hedge fund Cyrus Capital — last year to prevent it falling into administration.
Connect agreed to invest £30m into the airline to continue operations as part of a government rescue package in January.*
A potential loan to Flybe was part of a rescue deal announced almost two months ago. But the airline’s request did not meet certain criteria set by the government, according to Whitehall officials.*
Grant Shapps, transport secretary, said it was “very sad” that the company had gone out of business after four decades. The government was working with other transport providers to help Flybe customers get home, he said: “We are also urgently working with industry to identify how key routes can be re-established by other airlines as soon as possible.”
Virgin Atlantic said the consortium of owners had over the past 14 months invested more than £135m to keep Flybe flying for an extra year. This amount includes about £25m of the £30m committed in January 2020, alongside a time to pay an arrangement with the Treasury on air passenger duty of £3.8m.
“We are deeply disappointed that Flybe has been unable to secure a viable basis for its continuing operations and has therefore entered administration,” Virgin Atlantic said. “Sadly, despite the efforts of all involved to turn the airline around, not least the people of Flybe, the impact of Covid-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.”
Mark Anderson, chief executive of Flybe, which has operated since 1979, said: “The UK has lost one of its greatest regional assets. Flybe has been a key part of the UK aviation industry for four decades, connecting regional communities, people and businesses across the entire nation.”
Two rail operators on Thursday offered stranded Flybe customers and staff the option to travel free on their trains if they show their boarding details or ID.
FirstGroup said customers could use any of its rail companies, which include Avanti West Coast; Great Western Railway; South Western Railway; Transpennine Express and Hull Trains. Meanwhile, LNER, which is run by the government’s in-house train operator, offered the same on its line, which runs from London to north-east England and Scotland.
Flybe’s administration follows last year’s failure of UK travel group Thomas Cook, which was liquidated after it was unable to secure a lifeline from the government. The Civil Aviation Authority had to launch the biggest emergency repatriation in peacetime to bring back about 150,000 UK holidaymakers stranded abroad.
The situation is likely to be very different with Flybe as it largely serves domestic routes. A statement from Flybe confirmed the CAA would not be co-ordinating the repatriation of stranded customers, noting that passengers who had booked flights with Flybe should check the regulator’s website for further information.
The collapse comes after a difficult decade for the carrier, which has struggled with profitability since it floated in 2010. In spite of several restructurings, successive management teams could not prove it had a profitable niche in flying the less busy routes that were not well served by rivals such as Ryanair and easyJet.
Flybe’s administration raises questions for the government over the future of important regional air routes in the UK. The airline is responsible for nearly 40 per cent of all domestic UK flights and carries more than 9m passengers annually.
Shadow transport secretary Andy McDonald said: “The collapse of Flybe is disastrous news for passengers and employees alike and will cause real anxiety in many regions throughout the country.”
John Strickland, a London-based aviation consultant, said Flybe’s business model “has been challenged for a long time”.
“It suffered from previous overambitious fleet expansion which successive managements have grappled with but still remained too big to be viable in the regional air service market,” he said. “On top of this surface competition and the heavy air duty passenger tax burden added salt to the wounds.”
