Flybe shareholders urged to accept Virgin Atlantic's £2.2m takeover offer

Flybe shareholders urged to accept Virgin Atlantic's £2.2m takeover offer

Flybe shareholders urged to accept Virgin Atlantic's £2.2m takeover offer

A consortium led by Britain's Virgin Atlantic on Friday said it will buy ailing no-frills airline Flybe for £2.2 million ($2.8 million).

Flybe put itself up for sale after another profit warning in October, blaming a mix of currency volatility, rising fuel costs and Brexit uncertainty.

Several airlines including Stobart and Virgin have been mentioned in recent weeks as being in discussion with Flybe.

The joint venture company includes Virgin as well as infrastructure company Stobart Group and investment firm Cyrus Capital.

Connect Airways believes that combining Flybe and Stobart Air in a "more integrated commercial cooperation" with Virgin Atlantic's long-haul operations will create a "fully-fledged United Kingdom network carrier under the Virgin Atlantic brand, alongside Stobart Air's wet lease operations and aircraft leasing business, which will continue to operate as it does today".

The regional airline, like many of its peers, has been hit by higher fuel costs, Brexit uncertainty and intense competition in the sector.

The carrier part-owned by Sir Richard Branson will be the largest shareholder in the newly formed company, Connect Airways, with Stobart Group and Cyrus Capital Partners owning substantial stakes.

The trio, through Connect Airways, is offering 1p a share to Flybe shareholders, some way below Thursday's closing price of 16.4p.

"We have been affected by all of these factors which have put pressure on short-term financial performance".

The companies will also provide up to £80 million of further funding to the combined group to invest in its business and support growth.

The deal will see Cyrus, Stobart group and Virgin Atlantic commit to make available a £20 million bridge loan to support Flybe's ongoing working capital and operational requirements.

A spokesperson for Virgin Atlantic said the Flybe rebrand would coincide with a refurbishment program of its fleet. "We aim to provide an even better service to our customers and secure the future for our people".

Stobart Air is meant to continue under a separate Irish AOC.

Flybe acquired British Airways' BA Connect unit for 521 million pounds in 2006, adding more than 50 routes and doubling the number of customers to become No. 1 in Europe's regional market.

Shai Weiss, chief executive of Virgin Atlantic, said: "Together, we can provide greater connectivity to our extensive long-haul network and that of our joint venture partners Delta Air Lines, at Manchester Airport and London Heathrow".

"The combined entity will be a powerful combination with sufficient scale to compete effectively in the United Kingdom and European airline markets", added the former Easyjet executive.