Branson engulfed in crisis at Flybe just a year after Virgin teamed up with Stobart and Cyrus Capital to snap up airline on the cheap
Richard Branson’s Virgin airline teamed up with Stobart Group and hedge fund Cyrus Capital to snap up Flybe on the cheap in 2019
Virgin Atlantic founder Sir Richard Branson was last night facing a backlash amid fears he and fellow investors could pull the plug on Flybe less than a year after coming to its rescue.
The entrepreneur’s airline teamed up with Stobart Group and hedge fund Cyrus Capital to snap up Flybe on the cheap in early 2019, with the promise to invest £100million to turn the ailing carrier around. The deal – which was completed in March – all but wiped out shareholders, with investors receiving 1p a share as part of the £2.2million rescue. Shares had floated at 295p in 2010, meaning many faced huge losses.
The consortium, known as Connect, insisted this was the ‘most realistic means’ of securing the airline’s long term future after it had been hammered by high fuel costs, competition and spiralling debts.
But it is understood that two of Connect’s shareholders – Stobart and Cyrus – are now reluctant to inject £100million into Flybe in the coming years unless ministers agree to delay the airline’s multi-million pound air passenger duty bill.
This has left the airline on the brink of collapse, according to Sky News.
Connect’s takeover of Flybe enabled Branson to resurrect his ambitions to run a UK domestic airline after the demise of Virgin’s Little Red offshoot in 2014.
For Stobart the deal represented an opportunity to get more passengers to fly from Southend Airport, which it owns.
But their ambitions appear to be quickly unravelling as weak bookings and high levels of debt mean they have been forced to go cap in hand to the Government.
Rescue talks took place over the weekend and are continuing as they try to thrash out a deal.
Two of Connect’s shareholders – Stobart and Cyrus – are understood to be reluctant to inject £100m into Flybe in the coming years unless ministers agree to delay its air passenger duty bill
The uncertainty has thrown the travel plans of thousands of people with Flybe bookings into chaos – with 8.6m passengers flying with the airline last year.
Graham Stringer, Labour MP and a former member of the commons Transport Committee, said: ‘These routes that Flybe operate are absolutely vital for a number of communities that are remote from the rest of the UK like the Isle of Man, Northern Ireland and parts of the South West.
‘It’s therefore very concerning that 12 months after the new owners promised to keep Flybe going we are faced again with the airline potentially going bust.’
With the jobs of up to 2,400 Flybe staff at risk, union leaders are furious they have been frozen out of talks.
Brian Strutton, general secretary of the British Airline Pilots Association), said: ‘This is an appalling state of affairs and we demand that the owners of Flybe – Virgin, Stobart and Cyrus – and the government departments involved talk to us about Flybe. We have a right to be consulted and the staff have a right to know what is going on.’
Nadine Houghton, GMB national officer, said: ‘GMB has concerns about any business model that involves a short term approach to investment while playing fast and loose with peoples jobs and livelihoods.’
A Flybe spokesman said: ‘Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned. We don’t comment on rumour or speculation.’
Spokesmen for the Business department and the Department for Transport would not comment ‘on speculation or the financial affairs of private companies.’
Stobart and Virgin declined to comment last night.