The budget airline Flybe has put itself up for sale as a cocktail of rising fuel prices, the weaker pound and lower demand weigh on profits.
Stobart Group and easyJet are among the contenders for all or part of Flybe’s business, after the Exeter-based airline said it is in discussions with a number of strategic operators about a potential sale of the company, in a statement to the stock market.
Flybe’s announcement follows a warning last month that profits for the year would be significantly lower than investors expected because of a softening in the market – in part because of uncertainty surrounding the Brexit process. The weaker performance prompted a review of measures to cut costs and reduce the number of flights it makes, although on Wednesday it said further action may be necessary.
Flybe has appointed an investment bank, Evercore, to help to find a buyer, although it gave no indication of when or if a deal should be expected, or the identity of possible buyers.
Stobart Group, the infrastructure firm, already has a franchise agreement with Flybe, and walked away from a bid for the airline in March. A spokesperson for the company declined to comment.
EasyJet, the larger UK budget airline, has recently shown an appetite for acquisitions, after expressing interest in parts of troubled Italian carrier Alitalia, although it is understood it would be unlikely to bid for the entirety of Flybe’s operations.
An easyJet spokesperson said: “We’ve always said that we will play a role in consolidation where it makes sense. We evaluate all opportunities as they arise and have no further comment to make.”
Christine Ourmières-Widener, Flybe’s chief executive, said the airline has a “strategy in place that is working” but is suffering from “external headwinds”. A sale is one of multiple options being explored.
“We will look at the performance of each route,” the chief executive said, adding that reductions in the number of flights is also a possibility as the airline attempts to decrease its fleet size from 78 to 70. The airline is prepared to move quickly to adjust its schedule if required, she added.
Redundancies were not planned because the airline will rely on natural attrition of staff numbers, she said.
Union bosses expressed concerns about the airline’s plans. Unite national officer Oliver Richardson said the announcement was unsettling for workers.
“Our first priority will be to remove the uncertainty facing our members by seeking assurances on jobs, pay and terms and conditions from both Flybe and any potential new owners,” he said.
Brian Strutton, the general secretary of the British Airline Pilots’ Association, said the announcement was “a bolt out of the blue” for its members.
He added that Flybe is “fundamentally a sound airline”. The union will closely scrutinise any sale, but could take “other steps in order to protect our members’ interests”.
Shares in Flybe surged by as much as 40% as trading opened on Wednesday, but eventually slumped to a loss of 3.4%. This values the business at £24m, down from more than £100m in March.
Ourmières-Widener highlighted the airline’s efforts to raise the amount of money it makes per seat on its flights but revenues fell by 2.4% to £409m in the six months to the end of September compared to the same period last year.
Profit after tax for the six months were £7.4m, down from £16.1m in the same period last year.
Flybe is the latest carrier to struggle in recent months, under pressure particularly from higher oil prices. The Cypriot carrier Cobalt and Denmark’s Primera went bust last month, while the collapse of the UK budget airline Monarch triggered the biggest peacetime repatriation of British citizens last year.
Ourmières-Widener said customers should have “no worries at all” about current or future bookings. She did not expect the sale of the business to affect customer bookings.
“We have strong forward bookings and we are very committed to the business,” she said.
