Europe will lose two airline brands in the coming months. Loss-making UK regional carrier Flybe is being sold to a consortium involving Virgin Atlantic; and Air France-KLM has decided to gradually integrate the aircraft and staff of its offshoot Joon into Air France.
On Friday, Flybe announced it reached agreement to be bought—for just £2.2 million ($2.83 million)—by Connect Airways Group, a joint-venture company owned 30 percent by Virgin Atlantic Limited, the holding company of Virgin Atlantic Airways and Virgin Holiday, 30 percent by Ireland’s Stobart Aviation, and 40 percent by hedge fund, Cyrus Capital Partners. Connect also will acquire Stobart Air, Stobart Group’s regional airline, and aircraft leasing business, Propius.
Virgin Atlantic will re-brand Flybe, marking a return of the long-haul carrier into the short-haul business despite the unsuccessful outcome of its former domestic-flying Little Red subsidiary. Little Red operated four wet-leased Airbus A320s from Aer Lingus, linking London Heathrow with Edinburgh, Aberdeen, and Manchester. But Virgin closed the airline in 2015, some two years after it launched, following low passenger numbers and unsustainable losses.
“[Flybe and Stobart] 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,” said Virgin Atlantic CEO Shai Weiss. “In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”
Flybe’s network spans 190 routes serving 12 countries from 29 departure points in the UK and 44 in Europe. “Flybe plays a vital role in the UK’s transport infrastructure, which uniquely positions it to benefit from growing demands from long haul carriers for passenger feeder traffic,” Flybe’s CEO Christine Ourmieres-Widener said. It ranks as the UK's largest regional airline and flies 54.9 percent of all UK flights within mainland Britain excluding London. However, the airline ran into financial trouble and put itself up for sale last year. The industry has suffered from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit, said Ourmieres-Widener. “By combining to form a larger, stronger, group, we will be better placed to withstand these pressures,” she explained.
Connect will provide a £20 million bridge loan to support Flybe's ongoing working capital and operational requirements. After the buyout, it will provide £80 million in further funding.
Meanwhile, Flybe on Friday also revealed it agreed to sell slots at Gatwick airport to Vueling, the Spanish low-cost carrier subsidiary of International Airlines Group, for £4.5 million. It did not detail how many slots it divested.
The combined group will operate independently of Virgin Atlantic under one management team, though it intends for Flybe to continue as an independent operating carrier with a separate UK air operator certificate (AOC) while Stobart Air continues under a separate Irish AOC, not using the Virgin brand.
Network and route optimization will likely include a limited reduction in the number of Flybe’s aircraft, and integrating management functions could involve some headcount reduction, Flybe’s proposed new owners warned.
The Flybe buy comes one day after Air France-KLM confirmed months-long rumors it will scrap the Joon brand and operations. “The brand was difficult to understand from the outset for customers, for employees, for markets, and for investors,” said the company. “The plurality of brands in the marketplace has created much complexity and unfortunately weakened the power of the Air France brand.” Speculation that Air France-KLM might axe Joon arose soon after former Air Canada executive Ben Smith took over as CEO of the Franco-Dutch group in September.
The project initially launched under the name “Boost” and aimed to provide a low-cost alternative to better compete with the Gulf carriers. Joon, however, moved away from that initial target and commenced flights on December 1, 2017, as a hybrid carrier hoping to attract millennials. Initial flights all served medium-haul routes. Air France will absorb Joon’s 600 flight attendants its 13 Airbus A320s and four A330s will return to the Air France fleet.