UK airline Flybe Group plc announced today that its results for the year to 31 March 2013, although disappointing, are in line with market expectations and are due to lower passenger numbers and higher fuel costs, as well as US Dollar denominated costs and in regulated areas such as airport charges and air navigation fees.
The Exeter based airline reported a loss before tax, restructuring and surplus capacity costs of £23.2 for its fiscal year 2012/2013, a decline from the loss of £7.1m in 2011/2012.
Flybe also said it has taking action to turn its business around and bring it back to profitability. It has implemented a package of measures that includes a 20% reduction in its UK employee numbers and an agreement in principle for up to a 5% reduction in pilot’s salaries in return for extra time off.
The airline’s turnaround plans are being financed by the transfer of 25 pairs of arrival and departure slots at London Gatwick Airport to easyJet for a total consideration £20m, which is subject to a simple majority shareholder approval. Flybe said over 54% of its shareholders have given irrevocable approval to the transaction. The company has also deferred the delivery of 16 Embraer E175 (E-series regional jet) aircraft, which will reportedly save £20m of cash outflow for pre-delivery payments in winter 2013/14. Various other minor assets minor assets, largely surplus inventory, in both the UK airline and MRO businesses, are also to be sold by the company, it stated.
Jim French CBE, Flybe’s chairman and chief executive Officer, commented: “Flybe has exceeded its target of taking out £25m from its cost base during 2013/14 and will deliver around £40m in savings in this current financial year, expected to rise to £50m annualised savings from 2014/15 onwards. In the last few months we have streamlined the business, reducing UK-based headcount by more than 20%. We have also made major progress in reducing the cost of our supplier base.”
UK regional airline company Flybe Group Plc (LON:FLYB) said it is disappointed by the news that the European Commission (EC) will most certainly block Irish low-cost carrier Ryanair Holdings Plc’s (LON:RYA) planned buyout of Aer Lingus Group Plc (LON:AERL).
EC’s expected decision would not only prevent Ryanair from securing the 70% it does not already own in its smaller rival, but also hinder Flybe’s deal to acquire 43 Aer Lingus UK and European routes plus some aircraft for EUR1m (USD1.3m).
This latest agreement is part of Ryanair’s “unprecedented” remedies package in connection with the Aer Lingus bid. The company had also agreed to sell all of its and Aer Lingus’ London-Gatwick operations to International Airlines Group (LON:IAG).
Yesterday, Ryanair announced it was notified by the EC of its intention to ban the buyout despite the offered concessions. The company also noted it would appeal any prohibition decision to the European Courts. In its own statement, Flybe said it would wait to see the outcome of that process.
Ryanair is offering a price of EUR1.30 (USD1.75) per share to buy the remaining shares in Aer Lingus, thus valuing the company at EUR694m.
UK regional airline company Flybe Group Plc (LON:FLYB) said it had signed a deal under which it would acquire several aircraft and operating routes from Irish peer Ryanair Holdings Plc (LON:RYA), if the latter manages to successfully take over its rival Aer Lingus Group Plc (LON:AERL).
The planned transaction is part of a package of concessions sent to the European Commission (EC) by Ryanair in an attempt to finally obtain the regulator’s nod for its Aer Lingus buyout.
As part of the deal, Ryanair would form a new company, to be known as Flybe Ireland, and transfer to it a total of 43 European routes along with requisite number of slots and licences to operate them. In addition, the Irish company would contribute at least nine Airbus A320 aircraft and inject EUR100m (USD135.3m) in cash. In turn, Flybe will acquire the new company for EUR1m.
The move will only be carried out in the event that the EC clears Ryanair’s bid for Aer Lingus by 6 March 2013 and the transaction is completed in May. On the other hand, the Flybe Ireland deal is seen to close in October, after its potential buyer conducts due diligence and posts a circular to its own stockholders for approval. Flybe noted it has already received irrevocable acceptances representing 64% of the shareholders.
Yesterday, however, Aer Lingus’s CEO Christoph Mueller told journalists he expects the EC to once again block Ryanair’s takeover offer despite the proposed remedies. According to him, it is doubtful whether Flybe would be an independent competitor to Ryanair after such a move.
So far, European Union (EU) regulators had banned twice Ryanair’s effords to buy the 70% stake it does not already have in Aer Lingus. The latest offer of EUR1.30 per share values the target at EUR694m.