New US-based deal made in Flybe takeover war

Thursday 21 February 2019

Virgin Atlantic's bid to take over Flybe alongside the Stobart Group could have been scuppered at the last minute, as a new US airline-led consortium has come forward with a deal worth a lot more money.

Mesa Air Group, a Phoenix, Arizona-based airline, is behind the new proposal, which would strengthen Flybe's financial position significantly, and ideally bail it out of being on the very cusp of collapse.

In total, it will inject £65m. into the UK regional carrier, as part of a new consortium with a US hedge fund - Avenue Capital - and an investment firm, Bateleur Capital. 

But this whole deal is conditional on the previously agreed one with Virgin being totally abandoned. It was set to be finalised at the end of this week. That, now old, deal would see Flybe transferred to Connect Airways, a consortium being led by Virigin. 

How either of these deals would affect Guernsey's air links is not yet totally clear. Blue Islands, who have a franchise agreement with Flybe, have previously said it would not be affected at all, and would continue to operate in the same way no matter the outcome, but whether the 'new' airline that comes out of the deal would keep flying to Guernsey or even the Channel Islands is as yet unknown.

As far as the differences between the deals go, under the new terms, Flybe would get the £65m. worth of equity at about 4.5p a share, which is significantly more than the total value of the previous terms. Alongside the equity would also be the potential of assets, which could see Flybe with a total of a £120m. boost. Finally, Flybe would remain on the London Stock Market as part of these new terms. 

In contrast to that, the original deal would see the airline recapitalised.

Whatever decision is made, it does not need shareholder approval, so will be down to the company's board. 

Flybe is Europe's biggest regional airline and one of Britain's best-known aviation brands. It put it self up for sale toward the end of last year, blaming a toxic cocktail of currency volatility, rising fuel costs and Brexit-related uncertainty.

An industry price war has also exacerbated airlines' financial troubles, with Ryanair blaming the issue for a recent profit warning.