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Why is Flybe at risk of collapse and can it survive?

Europe's biggest regional airline, Flybe is at risk of collapse and is locked in survival talks, it is understood.

According to Sky News, the regional airline has been trying to secure additional financing as it suffers mounting losses. It is believed that accounting firm EY is on standby to handle a potential administration of Flybe Group, and that the UK government has been briefed on the crisis.

Flybe currently carries around 8 million passengers a year between 81 different airports - but can the struggling airline survive and continue taking to the skies?

Flybe, founded 40 years ago in 1979 is one of the UK's best-known airline brands. The airline has hubs in Birmingham, Manchester and Exeter and has a fleet of 74 aircraft. Starting out as Jersey European Airways, the airline achieved significant success in the 1990s including a 40% rise in passenger numbers between 1989 and 1990. In June 2000, the airline rebranded to British European as it expanded its selection of routes, before later becoming a low-fare airline known as 'flybe'. In 2006, the airline became the launch customer of the Embraer E-195 airliners and in 2007 the airline completed a purchase of BA Connect. In 2010, the company was valued at approximately £215 million as it floated on the London Stock Exchange.

However, Flybe has also experienced some challenges in recent times. In 2008, the airline advertised for 'actors' to fly between Norwich Airport and Dublin in order to try and boost passenger numbers. In 2016, Flybe CEO Saad Hammad left the company with immediate effect, and in 2017 a franchise agreement was ended between Flybe and Loganair. In 2018, the shares of the airline fell by 75% and it announced it was exploring a potential sale. In 2019, a takeover was confirmed by a Connect Airways consortium, including Virgin Atlantic and Stobart Aviation.

Flybe is due to rebrand to Virgin Connect this year, but there are now questions over whether the company will be able to survive.

Flybe blamed its 2018 sale on a mixture of rising costs, currency volatility and uncertainty related to Brexit. Difficult market conditions have led to multiple airlines struggling in recent times, some not surviving. In September 2019, Thomas Cook, which was the UK's oldest travel agent, collapsed after failing to find funds of £200m to fill a financial black hole. The collapse led to Britain's biggest ever peacetime repatriation operation, with around 165,000 Britons thought to have been temporarily stranded abroad. In 2017, Monarch Airlines collapsed amid financial difficulties and in 2019 Superbreak and LateRooms collapsed.

Most airlines have faced some challenges of some description over the last decade. Brexit uncertainty and currency fluctuations are likely to have had some negative impact on Flybe, but it has also faced increased competition. The rise of budget airlines has often seen price wars, and Flybe has been operating in direct competition with Loganair in some areas since the end of its franchise agreement in 2017. Weather issues such as volcanic eruptions have also impacted some airlines, as have changes in social trends and political climates in the UK and overseas. 

The consortium that purchased Flybe in 2019 had pledged to spend £100m as part of plans to turnaround the airline, but some reports are suggesting difficulties may have possibly arisen surrounding this. 

It is understood that the UK government may be considering whether it can help the struggling airline and avoid its collapse, which could come just months after the loss of Thomas Cook. If the airline was to collapse, it could see the loss of over 2,000 jobs and many thousands of customers affected.

At this stage, exactly how close Flybe could be to collapse is unclear. As with the announcements before both the collapses of Thomas Cook and Monarch Airlines, the news of Flybe being on the verge of collapse comes quite suddenly and somewhat unexpectedly. On Sunday evening, Flybe said “Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned. “We don’t comment on rumour or speculation.”

 

Photo Credit: Ian Gratton via Flickr under licence (CC BY 2.0)

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