Flybe: What went wrong and what should ticket-holders do as airline ‘on brink of collapse’?

Questions and answers about the troubled regional airline

Britain’s biggest regional airline, Flybe, is reported to be in last-ditch rescue talks. Sky News says the carrier is trying to secure additional funding – and that the accountancy firm EY is on standby to handle the possible administration of the Flybe Group. The government is said to be involved in negotiations to try to keep the airline aloft.

Normal operations are continuing, and the airline says: “Flybe continues to provide great service and connectivity for our customers while ensuring they can continue to travel as planned.”

These are the key questions and answers about the troubled airline.

How did Flybe start – and how significant is it in the airline world?

Flybe began life in 1979 as Jersey European Airways. In 2000 the airline became British European, and changed its name again to Flybe two years later.

The airline is based in Exeter and operates almost 200 routes in the UK and Europe. Flybe operates the majority of UK domestic flights that do not begin or end in London, with frequent links between Scottish and English airports, and more than a dozen routes connecting George Best Belfast City with airports in England, Wales and Scotland.

At many UK airports, including Aberdeen, Birmingham, Glasgow, Manchester and Southampton, it operates the highest number of flights.

Flybe also serves near-European cities such as Amsterdam, Dusseldorf and Paris.

In terms of passenger numbers, though, the airline is tiny: easyJet flies as many people in a month as Flybe does in a year. Yet for many business people and leisure travellers, Flybe is essential.

So what has gone wrong?

In the past few years, pretty much everything. A large slab of Flybe’s costs are in dollars, while the vast majority of its earnings are in sterling. So the post-referendum slump in the value of the pound hit the airline hard.

Flybe, along with other airlines, said Brexit uncertainty was hurting demand. The carrier lost millions on a failed venture to compete with the Scottish airline Loganair on routes to the Western and Northern Isles.

In addition, Flybe is operating in the most competitive aviation market in the world. Whenever a Flybe route becomes successful, bigger airlines move in with larger aircraft and sweep up the market. Flybe has been almost driven out of Bristol, with easyJet now having a monopoly to Belfast, Edinburgh, Glasgow and Newcastle .

Recently easyJet has announced plans to start competing with Flybe from Birmingham to both Edinburgh and Glasgow.

Many of Flybe’s intra-Great Britain routes are in competition with in competition with road and rail – and Air Passenger Duty of £26 on a round-trip within the UK airline puts people off flying.

Wasn’t Flybe rescued last year?

Yes, or at least everyone thought so. After Flybe put itself up for sale late in 2018, warning that it was fast running out of cash, a consortium comprising Virgin Atlantic, Stobart Group and a US hedge fund, Cyrus Capital stepped in, in March 2019.

They pumped in a rumoured £100m. In exchange the consortium bought the right to rebrand the airline as Virgin Connect and set about rationalising the route network – in other words, cancelling loss-making links.

So why would the airline be in trouble now?

It appears that the scale of Flybe’s problems were even bigger than the consortium anticipated. The losses have been exacerbated by the miserable winter that the airline is experiencing.

Demand remains soft, and some competing rail links are improving – in southwest England, for example, new rail timetables introduced on GWR a month ago dramatically improved services from Devon to London, damaging the appeal of the Flybe link from Exeter to the capital.

Some aviation insiders suggest that credit-card acquirers have increased demands for upfront cash, which is often a problem among ailing airlines.

There are also claims that the Virgin-led consortium is alarmed at the amount of additional cash that it is having to pump in – throwing good money after bad was one description.

One theory suggests that if Flybe were to go bust, then the three rescue partners would be able to buy assets from airport slots to aircraft leases fairly cheaply – and also renegotiate staff contracts.

I have a ticket for a future flight on Flybe. What can I do?

At this stage, nothing more than assume it will go ahead. Flybe says: “We don’t comment on rumour or speculation.”

But all of Flybe’s operations are going ahead as normal, and the main concern today is high winds over the Irish Sea.