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.
British Airways/IAG
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
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.
Bottom line
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?
Curious as to why IAG would want Flybe although it could be to help connections within the British Isles as Aer Lingus and BA do contract some franchise agreements for regional traffic which is Flybe's bread and butter. Aside from that it seems more likely they just don't want Virgin to get it.
Virgin on the other hand would really benefit from Flybe's network not only as a feeder airline but as an expansion...
Curious as to why IAG would want Flybe although it could be to help connections within the British Isles as Aer Lingus and BA do contract some franchise agreements for regional traffic which is Flybe's bread and butter. Aside from that it seems more likely they just don't want Virgin to get it.
Virgin on the other hand would really benefit from Flybe's network not only as a feeder airline but as an expansion of the business. Delta like all the Big 3 of America has a lot of experience with franchising and operating regional airlines combined with KLM's cityhopper and Virgin purchasing Flybe is a logical step for the airline.
@Niko
Twat
@James My bad, I had the mistaken impression you'd been hired by OMAAT as a full time member of staff. I apologise for my grumpy comment before I'd had my morning coffee.
@Elijah And yet I'm not the one resorting to name calling; is that a sign of you being more 'grown up'? :-)
Vueling use avios too
Flybe dosent have the LHR slots that BA really want. BA aren’t interested in flying regional routes that don’t feed into its London hubs.
Problem is also capacity.
T5 is already full and the domestic gates already crowded so any new T5 domestic routes would likely be bussed which isn’t popular with passengers.
T3 isn’t capable of separating international domestic arrivals so they would have to use T2. Does BA really want to spread itself...
Flybe dosent have the LHR slots that BA really want. BA aren’t interested in flying regional routes that don’t feed into its London hubs.
Problem is also capacity.
T5 is already full and the domestic gates already crowded so any new T5 domestic routes would likely be bussed which isn’t popular with passengers.
T3 isn’t capable of separating international domestic arrivals so they would have to use T2. Does BA really want to spread itself over 3 terminals??
I suppose they could get a dispensation (like VS did for Little Red) to run an airside bus service to T3 and 5 and so avoid pax having to reclear security but that just adds to costs and complexity (and does HAL want more airside bus traffic to deal with even if they were pollution free electric ones)
And given the number of other airlines IAG have expressed an interest in buying yet never followed through their bids they lack credibility and could be sen as desperate. One minute they were buying Norwegian the next not ...
What a weird analysis. So it makes sense for BA because they can change the Flybe routes to provide them more feed, but it doesn't make sense for Virgin Atlantic to do the same (even though they have a MUCH higher connection possiblity than BA does, with them both having a Manchester base)? Why?
I could hope that whichever airlines becomes the acquirer will develop luggage policies compatible with other carriers. I did a round trip between Dublin and Inverness where weight and baggage limits were so out of line with other carriers that I had to repack luggage and leave luggage at Dublin hotel to meet luggage limit. I had flown over in premium economy from North America with 23 kilo limit. I think Flybe limit was one...
I could hope that whichever airlines becomes the acquirer will develop luggage policies compatible with other carriers. I did a round trip between Dublin and Inverness where weight and baggage limits were so out of line with other carriers that I had to repack luggage and leave luggage at Dublin hotel to meet luggage limit. I had flown over in premium economy from North America with 23 kilo limit. I think Flybe limit was one bag at 15 kilo limit. The inconvenience convinced me not to fly them again and take less direct route.
James, dont Atlantic fly from MAN ?
@Niko
Don’t be such a twat mate and grow up.
Struggle to see that BA would be allowed to use the Heathrow slots that Flybe are using for their domestic routes, as these are (all, I think) “remedy” slots BA were required to offer to competition following their purchase of BMI.
With no use of the heathrow slots, and no plans for non-london flights, what would BA gain, network-wise beyond a few extra connections for the AA joint venture services from Manchester? Roll back...
Struggle to see that BA would be allowed to use the Heathrow slots that Flybe are using for their domestic routes, as these are (all, I think) “remedy” slots BA were required to offer to competition following their purchase of BMI.
With no use of the heathrow slots, and no plans for non-london flights, what would BA gain, network-wise beyond a few extra connections for the AA joint venture services from Manchester? Roll back about 10/15 years, and it was Flybe that purchased BA’s domestic regional (BA Connect) operations!
Maybe they can see some value proposition from having Flybe as a 6th carrier in their stable, but I struggle with this given the lack of overlap (fleet type, value proposition etc).
Virgin, maybe a bit different. I can see the benefit of a sister brand that provides feeder services to Virgin and it’s equity partners, for instance codeshares with Delta through Heathrow, Edinburgh and Glasgow and closer relationships feeding the AF and KL hubs in addition to Virgin at Heathrow and Manchester? Again far from a perfect match, but maybe some possibilities?
@james you do realise the history of the majority of BE routes don't you? Maybe you don't given you were Down Under.
I'd be surprised if we saw BA going in for BE. Here's the reason. BA decided 10-15 years ago that regional flying was not for them. Hubs at places like MAN, BRS, SOU and BHX were shut. Guess who the operation was sold to.....FlyBe.
The only operation that was kept was...
@james you do realise the history of the majority of BE routes don't you? Maybe you don't given you were Down Under.
I'd be surprised if we saw BA going in for BE. Here's the reason. BA decided 10-15 years ago that regional flying was not for them. Hubs at places like MAN, BRS, SOU and BHX were shut. Guess who the operation was sold to.....FlyBe.
The only operation that was kept was LCY.
In relation to comments about reed into London. BE shut all their LGW operations a couple of years back. They sold to EZY. The LHR services were picked up after VS shut down Little Red. The only service therefore that BE operate into London that BA don't already operate is the NQY service which BE recieve a government subsidy to operate. In short there really isn't any new feed routes into London that acquiring BE would give them and Then there is the UK competition authorities to contend with.
I'd be shocked if BA decided to acquire for BA. They have made it clear that regional flying isn't for them. If IAG did put in a bid I'd have thought that Vueling might be the carrier to take these routes but then again Vueling has a dire reputation and absorbing a new fleet would alter their business model.
As for VS, I agree on the face of it it appears odd. But VS Have given MAN a bit of love so there is potentially a bit of feed on services into MAN. It's basically going dual hub. To me though the interest fromVS is part of the wider VS/DL/KL/AF arrwngement. Maybe just maybe KL have decided they'd like a return to th UK regional market. And rather than acquire BE themselves for Cityflyer (like they did with Air UK) it is more appealing to have VS make the approach especially given BEs position in the AMS market. Following approval of the share purchase of VS, the former BE could be closer aligned with KLM Cityflyer. Just a thought.
The reasoning behind Virgin interest is that they would need feeder eventually (bare in mind that Virgin is consolidating it's network on dual hub strategy - Manchester and Heatrow).
On top of this, Flybe is 4th biggest owner of Schiphol slots (which are becoming incredible scarse and problematic for KL). AF-KL will have have a big stake in Virgin soon, KLM is also the biggest European operator of Embraer fleet (with E&M center at...
The reasoning behind Virgin interest is that they would need feeder eventually (bare in mind that Virgin is consolidating it's network on dual hub strategy - Manchester and Heatrow).
On top of this, Flybe is 4th biggest owner of Schiphol slots (which are becoming incredible scarse and problematic for KL). AF-KL will have have a big stake in Virgin soon, KLM is also the biggest European operator of Embraer fleet (with E&M center at AMS) and KLM still has British operations (some of their personnel is stationed at UK bases plus KLM Cityhopper still holds a valid UK AOC.
Add into equation the rumour that KLM will transfer some LHR slots to Virgin, and to me Virgin (backed by Delta and soon a part BlueSky JV) is a frontrunner here.
I am struggling to make sense of how this would work for Virgin at all given they are not profitable themselves, and they have so little overlap as you point out with flybe hubs.
I could see this working for BA as a nice little feeder network, and although the idea of extending their quasi-monopoly even further isn’t appealing it at least makes sense.
I’d also be interested to know how an acquisition of a...
I am struggling to make sense of how this would work for Virgin at all given they are not profitable themselves, and they have so little overlap as you point out with flybe hubs.
I could see this working for BA as a nice little feeder network, and although the idea of extending their quasi-monopoly even further isn’t appealing it at least makes sense.
I’d also be interested to know how an acquisition of a regional airline like Flybe might affect the chances competition authorities allowing IAG to acquire Norwegian as well, something they apparently still want to do.
This is the third article in a row that James has posted that I have already read elsewhere. Perhaps try getting up earlier mate.
@ Niko - I have been travelling this week. Blogging isn't my full time job ; )
What a photo-op of Sir Branson, but his employee obviously felt shocked and probably offended.