Flybe (FLYB) has spent recent years trying to undo its past mistakes of overexpanding too quickly in a saturated European airline market. So far it’s made some progress, with a 9 per cent reduction in capacity during the first half of its financial year alone, giving way to an improvement in load factor from 76 per cent to 84 per cent. Still, that utilisation rate trails far behind that of larger rivals such as easyJet (EZJ) and Ryanair (RYA). Flybe has a backup option – to put itself up for sale.
Capacity problems have been exacerbated by currency headwinds and rising fuel prices. Chief executive Christine Ourmières-Widener said these factors, coupled with slowing growth in the European market for short-haul flights, has prompted a strategic review of the business, including ways to accelerate further capacity reduction, cash management and cost savings. The board has also commenced a formal sale process, saying that it is in discussions with “a number of strategic operators” about a potential purchase.
One company that could be a potential acquirer is Stobart Group (STOB) – the owner of London Southend airport made an unsuccessful bid to buy the airline earlier this year. In February Stobart stated that it had funding in place to buy the business, but a month later it was announced the two companies could not reach an agreement on a deal. It has been suggested that a dispute over how to fund the Flybe acquisition is what spurred Stobart founder Andrew Tinkler to try to oust chairman Iain Ferguson. Such a purchase could prevent Flybe’s plans to wind down operations at Stobart’s Southend airport by 2020.
