Recently I wrote about Flybe’s grim financial position, which included dramatic profit warning forecasts (i.e. notifying the market that their losses would be even worse than expected) and a huge share price drop.
So it didn’t come as a huge surprise that just a few weeks later, Flybe admitted they were open to the idea of being purchased by another airline.
Interestingly, two of the biggest airlines in the UK are reportedly already in talks to purchase Flybe.
IAG, the owner of British Airways (and Iberia, Aer Lingus and others), is now the favourite to acquire the struggling airline, according to The Sunday Telegraph, though they have refused to comment on the news publicly.
Flybe operates a number of regional routes around the UK with no competition, so it would make sense, if IAG can pick up the airline cheaply, that these routes could provide some feed into their London hubs. It is unclear if IAG is interested in domestic UK routes that do not touch London.
Flybe already uses Avios as their loyalty program, which is the loyalty program the other IAG airlines also use (aside from Vueling).
Virgin Atlantic has commented publicly on their interest in the airline, as they already partner with Flybe, saying:
Virgin Atlantic has a trading and codeshare relationship and confirms that it is reviewing its options in respect of Flybe, which range from enhanced commercial arrangements to a possible offer for Flybe. Virgin Atlantic emphasises that there can be no certainty that an offer will be made nor as to the terms of any offer.
Easyjet and Ryanair have both publicly said they have no current interest in purchasing the airline.
Flybe’s struggling share price doubled after the news of the potential bidding war. The airline has also said they would consider dramatically reducing costs by cutting routes rather, than a sale of the business.
It will be very interesting to see what happens with Flybe, if indeed it is sold. Being ‘in talks’ doesn’t mean either airline will actually make an offer.
British Airways could be considering purchasing it just to stop Virgin Atlantic from doing so, though with a rejigging of some Flybe routes it could provide decent feed to British Airways’ massive long haul operations.
The Virgin Atlantic interest could also make sense given the two airlines already cooperate together, noting Virgin Atlantic is a much smaller airline that largely flies to leisure destinations, and though there would be some feed, many Flybe routes do not touch airports Virgin Atlantic flies to/from anyway (the main Flybe hubs are Manchester and Birmingham), noting Virgin Atlantic is slowly building Manchester as a hub.
Virgin Atlantic did attempt domestic UK routes themselves with their ‘Little Red’ brand years ago, but that was unsuccessful.
What do you think will happen with Flybe?