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Aviation: Flybe deal progresses

The fate of struggling UK regional carrier Flybe took another turn this morning, when the board elected to sell components of the stock market-listed firm. Connect Airways, founded by a consortium comprising Virgin Group, Stobart Aviation and Cyrus Partners, will pay an increased £2.8m for parts of Flybe Group including the airline, the maintenance activities and its digital business. The transaction is expected to be completed by February 22 as shareholder approval is not required.

A statement from Flybe said it had failed to meet conditions of Connect Airways' earlier £2.2m offer, which required the release of funds paid by customers but held by credit card acquirers for security. The revised deal involves an immediate infusion of £10m to support ongoing operations, with another £10m to follow. The consortium buying the business has also maintained its pledge to invest a further £80m in future and to honour arrangements to buy Flybe Group at £0.01 per share.

Flybe said: "The board believes that obtaining this revised facility from the consortium provides the security that the business needs to continue to trade successfully. This preserves the interests of its stakeholders, customers, employees, partners and pension members.”

The end is nigh. Flybe is now almost certain to be re-branded and operate as a Virgin Atlantic franchise. (The Aviation Oracle)

Flybe's shares fell sharply on the news this morning, trading at a little above £0.02 despite having been valued at more than £0.16 at the end of last week and down 93% compared to a year ago. This gives the firm, believed to be trading with debts nearing £100m, a current market capitalisation of £8.9m.

Stock market arrangements

So what changed? Late last week an offer was made for Flybe on which shareholders would vote, with holders of 75% of the stock required to support the deal. Three working days later the acquisition seems to be a fait accompli - a deal which existing investors have no say in and will leave them out of pocket. That got The Aviation Oracle digging.

When Flybe was put up for sale late last year, making an announcement to the markets wasn't the only thing the board did. Proposals to change the firm's status on the stock market were also put forward:

  • When airline was put up for sale on November 14 last year, the directors recommended moving Flybe plc (the holding company) from a premium stock market listing to a standard listing. The premium listing dictated that any significant financial transactions conducted by the firm had to be appr