Virgin Atlantic, Stobart Group And Cyrus Capital Partners Form Connect Airways

The Boards of Flybe and Connect Airways, a company bringing together Virgin Atlantic Limited, Stobart Group and Cyrus Capital, reached agreement on the terms of a recommended cash offer for Flybe. Following which Connect Airways will acquire the entire issued, and to be issued, share capital of Flybe. Stobart Group will contribute Stobart Air and Propius, Stobart’s aircraft leasing business into Connect Airways.

Concurrently with announcing the Acquisition, Cyrus, Stobart Group and Virgin Atlantic have committed to make available a $25.5 million bridge loan facility to support Flybe's ongoing working capital and operational requirements. In addition, following completion of the Acquisition, Cyrus, Stobart Group and Virgin Atlantic are intending to provide up to $102.09 million of further funding to the Combined Group to invest in its business and support its growth, as well as a contribution of Stobart Air.

Flybe will continue to serve customers and communities across the UK and Ireland. In due course Flybe will be rebranded to Virgin Atlantic. The Combined Group will offer significant benefits for customers:

• Deliver more choice to customers by linking UK regions and Ireland to Virgin Atlantic’s extensive long-haul network through improved connectivity at Manchester Airport and London Heathrow
• Provide a strong foundation to secure the long-term future of Flybe, its customers and its people by leveraging the combined commercial, operational and functional expertise and scale of Virgin Atlantic and Stobart Group
• Utilise the strength of the Virgin Atlantic brand, and the offer of an enhanced customer experience in keeping with Virgin Atlantic’s heritage
• Provide the Combined Group with an enhanced presence at Manchester Airport , London Heathrow Airport, with the potential to grow further in London Southend Airport
• The Combined Group intends for Flybe to continue as an independent operating carrier with a separate UK Air Operator Certificate (AOC) under the Virgin Atlantic brand. Stobart Air is intended to continue under a separate Irish AOC.
• The Combined Group will operate independently to Virgin Atlantic under one management team, owned 40% by Cyrus Capital Partners, 30% by Stobart Aviation, a wholly owned subsidiary of Stobart Group, and 30% by Virgin Atlantic Limited, the holding company of Virgin Atlantic Airways and Virgin Holidays.

"Flybe plays a vital role in the UK’s transport infrastructure with a UK regional network which uniquely positions it to benefit from growing demands from long haul carriers for passenger feeder traffic. We have successfully implemented a clear strategy in recent years focused on tighter fleet management, improving revenue per seat and increasing load factors," said Flybe CEO Christine Ourmieres-Widener. "The pursuit of operational excellence has reduced maintenance times and increased efficiencies and customer satisfaction.

"However, the industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit. We have been affected by all of these factors which has put pressure on short-term financial performance. At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows.

"By combining to form a larger, stronger, group, we will be better placed to withstand these pressures. We aim to provide an even better service to our customers and secure the future for our people."

"The Virgin Atlantic brand is built on the foundation of putting customers at the heart of everything we do, providing them with the choice they deserve and a travel experience they love. All possible because of our amazing people," said Virgin Atlantic CEO Shai Weiss.

"We are pleased to have this opportunity to partner with Stobart Group and Cyrus Capital to bring Virgin Atlantic service excellence to Flybe’s customers. Together, we can provide greater connectivity to our extensive long haul network and that of our joint venture partners Delta Air Lines, at Manchester Airport and London Heathrow. In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM."

"The Board of Stobart Group believes that bringing Stobart Air together with Flybe and partnering with Virgin Atlantic and Cyrus Capital is the best way for us to play an active role in regional airline consolidation," said Warwick Brady, CEO of Stobart Group.

"The combined entity will be a powerful combination with sufficient scale to compete effectively in the UK and European airline markets. It will allow us to continue to work with Flybe and provides an excellent opportunity to continue to grow passenger numbers at London Southend Airport."

"We are delighted to be working once again with the Virgin Group following our successful partnership in the launch and eventual sale of Virgin America to Alaska Airlines," said Cyrus partner Lucien Farrell. "We believe Flybe’s strong market position and high quality management together with Virgin Atlantic’s dedication to the best customer experience and Stobart Group’s expertise in regional flying will produce a worldclass airline."

(Source: Virgin Atlantic news release. Image from file)

FMI: www.virginatlantic.com