Flybe shares soar as Virgin emerges as possible buyer

International carrier would re-enter domestic market if takeover went ahead

Shares in embattled regional airline Flybe surged by more than 70 per cent yesterday following confirmation that Virgin Atlantic is in talks about a surprise takeover bid for the struggling airline.

Virgin, part owned by Sir Richard Branson, is vying with logistics group Stobart to buy Flybe and is thought to be particularly interested in getting access its take-off and landing slots at London’s Heathrow Airport.

A deal with Virgin would see it re-enter the domestic aviation market after it axed its Little Red service in 2015.

Flybe, which flies from Edinburgh, Glasgow and Aberdeen airports, said: “The board of Flybe Group notes the recent media speculation and confirms that Virgin Atlantic Airways Limited is one of the parties it is in discussions with as part of the formal sale process.”

The regional airline put itself up for sale last week after warning over profits earlier in the year.

The Exeter-based carrier is battling challenging conditions in the airline industry and has been hit with falling demand and a £29 million hit from rising fuel costs and the weak pound.

David Madden, market analyst at CMC Markets UK, said: “Given that the sector has been be struggling recently, the prospect of consolidation isn’t a surprise.”

Stobart Group, which already has a franchise agreement with Flybe, initially walked away from a bid for the airline in March after failing to agree on terms but had seen as a possible suitor.

Flybe has 78 planes operating from smaller airports including London City, Southampton and Norwich, and flies to destinations across the UK and Europe.

It carries around eight million passengers a year and Virgin would look to attract customers into its long-haul network via Flybe’s domestic routes.

Virgin said in a statement: “Virgin Atlantic has a trading and codeshare relationship with Flybe and confirms that it is reviewing its options in respect of Flybe which range from enhanced commercial arrangements to a possible offer for Flybe.”

Trade unions have already raised concerns over the impact of a Flybe’s sale on the carrier’s 2,300 employees. General secretary, Brian Strutton, from pilots union Balpa said: “Balpa believes that Flybe is fundamentally a sound airline and we will scrutinise any offers to buy Flybe very carefully to ensure continued employment is protected.

“We also expect to be consulted by Flybe and potential bidders over any future plans they have for the airline and its employees.”

In half-year results announced last week, Flybe saw cost-cutting help lift underlying pre-tax profits to £9.9 million from £9.2m a year earlier.

But statutory pre-tax profits more than halved to £7.4m from £16.1m a year earlier. Shares in Flybe closed up 71.3 per cent, or 6.9p at 16.55p.

businessdesk@scotsman.com