The airline’s troubles extended beyond the late delivery of aircraft, argues Ian Taylor
The timing of Flybe’s failure in the early hours of Saturday was not widely anticipated, but the airline’s struggles were predictable and its collapse not unexpected.
A cursory look at Flybe’s history gave a fair indication of its future when hedge fund Cyrus Capital acquired the name and resurrected a portion of the regional carrier’s former operation nine months ago.
Administrator Interpath Advisory reported Flybe was losing up to £5 million a month “just prior to filing”, operating a fleet of eight turboprop aircraft. Yet the administrator suggested “the late delivery of 17 aircraft” delivered a “shock” as had “reduced demand for travel”.
How tripling the fleet would have stemmed rather Flybe’s losses isn’t clear, just as it’s hard to reconcile “reduced demand” with the fact the carrier’s relaunch in April 2022 coincided with travel’s resurgence.
Cyrus claimed to manage $3.5 billion worth of assets last year so had the funds to keep Flybe going. Presumably, it decided there was no point throwing money away. It also knew what it was buying, having owned 40% of Flybe when it collapsed previously.
The administrator noted “enormous efforts to seek new investors and/or owners”, but “the time was not right”. That could be because Flybe’s only real asset is its seven pairs of slots at Heathrow.
Flybe, originally launched in 1979 as Jersey European Airways, was owned privately by steelmaker Jack Walker for almost three decades. Renamed British European in 2000, it became Flybe in 2002.
Its troubles stem from the challenge of operating a UK regional carrier profitably up against the low-cost giants on the few routes that make a difference.
The airline lost money every year since being publicly listed in 2010.
A consortium of Cyrus Capital, Virgin Atlantic and Southend Airport owner Stobart Group bought Flybe for just £5 million in March 2019 despite the carrier having a market capitalisation of £43 million in the December.
Cyrus had partnered with Virgin Group before, having been a launch investor in US airline Virgin America (since acquired by Alaska Airlines) in 2005.
But as Travel Weekly noted in March 2019: “Flybe is not Virgin America and the UK regional market is not the enormous and profitable US domestic market.”
The new owners sought a government rescue deal less than a year later, in January 2020, winning a delay in paying an APD bill. But when Covid hit in March, the government balked at granting a £100 million loan and the owners, including Cyrus, pulled the plug.
Administrator Ernst & Young reported Flybe owed up £650 million to unsecured creditors and a further £136 million to those secured. Yet just three months later, Cyrus bought the name and began work on a relaunch using some of Flybe’s former leased fleet.
Travel Weekly wrote at the time of the January 2020 rescue: “None of what is proposed appears likely to transform the economics of Flybe’s operation.
“It looks no more than a short-term fix for a perennially troubled business.”