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Flybe activists up the ante

One of the struggling airline's largest shareholders has offered a cash injection – but there is a catch
February 6, 2019

The boardroom battle at Flybe (FLYB) is heating up. Former Stobart Group (STOB) chief executive and top five Flybe shareholder Andrew Tinkler has offered a capital injection to replace the funding made by Connect Airways, but only if the newly formed consortium's bid fails to go ahead. A representative for Mr Tinkler would not comment on how much he has intended to put forward or if this would be enough to save the airline from its financial woes.

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Flybe said discussions with Mr Tinkler were in preliminary stages and did not represent a formal offer. Mr Tinkler said that he looked forward to the Flybe board “continuing to engage positively” with his proposal and that his decision to purchase Flybe shares following the Connect Airways bid had “nothing to do” with his ongoing dispute with the Stobart board.

In a separate announcement, the struggling airline confirmed that its largest shareholder, Hosking Partners, had submitted a successful application to call a general meeting where shareholders would vote on the election of Eric Kohn as a director. Hosking Partners, which owns around 19 per cent of outstanding Flybe shares, is seeking to replace existing director Simon Laffin. A representative for Hosking Partners said that Mr Kohn’s background in the aviation industry and “rigorous examination” of previous companies he has worked with made him the ideal candidate.

So far, Hosking claims to have around 40 per cent of voting shareholders' support, including both institutional and private shareholders. A representative for the asset manager said private investors had “lots of anger and worry” about the outcome of their investment in Flybe.

It is unclear whether this 40 per cent of shareholder support includes Mr Tinkler, who bought a 12 per cent stake in Flybe after the 1p-a-share offer from Connect Airways, the joint venture between Stobart, Virgin Atlantic, and Cyprus Capital Partners via DLP Holdings, was announced. 

Flybe’s struggles stem from its rapid expansion in a crowded market for European airlines. The airline has started to reduce the size of its fleet, aiming for an “optimal level” of 70 aircraft, compared with 80 as of March last year. However, concerns are growing that this reduction may not be enough. Handing back aircraft can also be expensive, whether it’s from breaking a lease agreement or getting older planes back up to the state at which they were borrowed.

Flybe’s card acquirers have also demanded “significantly higher cash collateral” for credit card payments, which materially hurt its unrestricted cash position, doubling to £16.4m. This could make its £82.1m-worth of net debt, which increased 39 per cent during the six months to September, look riskier. Over the most recent six-month reporting period, Flybe burned though £32.5m-worth of cash, compared with £22.5m the prior year.