07 February, 2019

Flybe directors recommend Connect Airways offer for the crisis hit firm

A full document has been issued from Flybe on the offer from Connect Airways - a company jointly-owned by DLP Holdings S.ร .r.l., Stobart Aviation Limited and Virgin Travel Group Limited, a wholly-owned subsidiary of Virgin Atlantic Limited. The document focuses on advising shareholders to agree to the deal before a general meeting is due to take place a March 4th.

Connect Airways has offered 1 pence in cash per Flybe share, the Acquisition values the issued and to be issued ordinary share capital of Flybe at approximately £2.2 million on the basis of the fully diluted share capital of 216,656,776 Flybe Shares.

Since the appointment of Christine Ourmiรจres-Widener as CEO, Flybe had implemented a clear strategy focused on tighter fleet management, improving revenue per seat performance and increasing load factors. Flybe's pursuit of operational excellence had led to a significant reduction in maintenance lead-times and higher customer satisfaction. Delivering this new strategy required management to address several material legacy issues such as engine and aircraft contracts, which significantly increased cash requirements.

The current broader market for air travel has been challenging for all parties. There have been a number of airlines who have gone out of business over the past year and several others have issued profit downgrades. While Flybe had made tangible progress in delivering its strategy, maintaining momentum had been hampered by the challenging market environment. Ongoing fuel and currency impacts presented particularly significant headwinds for Flybe as did the rapid and significant tightening on Flybe's liquidity from the card acquirer market. In addition, the general economic outlook and conditions had impacted the business leading to a further weakening in consumer demand, affecting cash, revenues and profit adversely.

On 17 October 2018, Flybe announced that, due to weak consumer demand in domestic and near-continent markets, together with higher fuel prices and a weaker sterling, the Company's profit performance would be lower than previously expected.

On 14th November 2018, Flybe confirmed that it needed sufficient additional liquidity to continue to operate as a going concern and the firm announced therefore that it was undertaking a comprehensive strategic review of its options, including a potential sale of the Company by way of a Formal Sale Process. A number of interested parties got in contact with the airline and discussions took place.

15 January 2019, Flybe, therefore, entered into the Subsidiary Sale SPA, agreeing to sell the Group's main trading company, Flybe Limited (including Flybe Aviation Services Limited), and the digital company Flybe.com Limited to Connect Airways for £2.8 million (payable to the Company), subject only to a limited number of conditions. At the same time the Bridge Facility was revised and £10 million was utilised by Flybe Limited immediately to support the business, with a further £5 million being utilised on 25 January 2019. In addition, in order to improve liquidity, a number of improved arrangements with Flybe's credit card acquirers and banks were also reached in conjunction with the Subsidiary Sale.

The Flybe directors have unanimously agreed that the offer from Connect Airways should be accepted. They have also irrevocably undertaken to vote in favour of the scheme in respect of their own beneficial holdings (and the beneficial holdings which are under their control and those of their close relatives) totalling 871,664 Flybe Shares representing approximately 0.40 per cent. of the issued ordinary share capital of Flybe as at 5 February 2019.