Virgin Atlantic In Talks To Buy Flybe – Here Is Why

Flybe is under the hammer to be snatched up by goliath Virgin Atlantic.

The news has come from inside sources claiming that Virgin Atlantic might be a potential buyer of well known regional service Flybe.

virgin Flybe
Virgin Atlantic might be the new buyer for Flybe. Source: Skynews

Who is Flybe?

If your new to this story, Flybe is a domestic British airline that has been struggling to make a profit for some time.

Britain’s Flybe operates 218 routes in 10 countries, and carrier flies domestically within the UK, as well as to European cities — with a specific focus on smaller, secondary airports.

They have 78 planes in their fleet, mostly made up smaller turboprop aircraft.

Flybe
Flybe

Flybe has a problem, it competes not only with domestic services that British Airways provides, but as they also fly to secondary airports, low-cost carriers EasyJet and Ryanair.

Last month, Flybe revealed that it was on the market after huge losses. Their share price has fallen 75% and the company is now valued at only 25 million pounds or $32,192,500 USD. That is very cheap for an airline.

Why does Virgin Atlantic want Flybe?

Virgin Atlantic actually tried to create a domestic carrier back in 2014, called Little Red.

Unfortunately, it was not successful, with Virgin blaming the lack of available slots at Heathrow for the failure. Virgin has been hungry to have another go at the domestic British market ever since.

“Little Red initially faced an uphill battle to win recognition and convert customers to its services.” – Virgin Atlantic’s chief executive, Craig Kreeger

There are a variety of reasons why Virgin Atlantic sees buying Flybe as very attractive:

  • Access to the British domestic market. Buying an existing service will save plenty of start-up costs compared to refounding a new airline.
  • Heathrow landing slots. As mentioned in another article, Heathrow is very competitive when it comes to who can land there. Airlines must auction slots, sometimes for well over a million dollars. To be able to get a slot might make the acquisition cost worth it alone. Virgin also has some spare slots from the bankruptcy of Cobalt Air a few months ago.
  • Domestic network to feed flights to Virgin Atlantic hubs (Virgin Atlantic’s long-haul flights via Manchester, Glasgow and London Gatwick).
  • Virgin and Flybe already code-share flights. A merger or acquisition is simply the next step in cooperation.
  • Rising oil prices and costs favors consolidation of aircraft. By growing larger, overall running costs will reduce for Virgin Atlantic.

Will Virgin be the only potential buyer?

Now that there has been a first bidder, we can more than expect additional players to enter the game. IAG (the owner of British Airways) might make a play, as FlyBe competes with their domestic BA service. Additionally, international firms like Qatar might be interested in increasing their fleet size.

It has also been rumored that another firm, Stobart Group, is interested in buying the airline. This group currently operates a variety of regional aircraft for Aer Lingus and Flybe.

Industry insiders confirmed that Virgin Atlantic and Stobart were the leading potential bidders for Flybe, with easyJet understood not to be interested in making an offer for the company.

It is understood that whoever buys the struggling airline will reduce capacity and focus on its most profitable routes. If this is Virgin, we can almost guarantee they will turn it into a shuttle service to their hubs.

What do you think of this sale?

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