Sunday , July 25 2021

Ryanair waited with wings as expected by Flybe to be carved

By Geoff Percival

Ryanair has been named a significant beneficiary – even though it is not likely to be a direct buyer – from the expected sales from the British regional airline, Flybe.

Reports in the British media have suggested Flybe is looking for sales or mergers with rivals, even though the airline has not confirmed this. Its shares skyrocketed almost 30% on the news.

Regional route operators who suffered losses recently issued earnings warnings, citing fuel costs, weakening demand and currency woes as the main challenges.

Stobart Air – which operates the Aer Lingus Regional network and recently obtained a contract to run the British regional route British Airways, through the latest BA Cityflyer brand – has been linked again to the move to Flybe. The previous approach by Stobart was rejected by Flybe in March.

Flybe is likely to look for trade buyers, according to Goodbody aviation analyst Mark Simpson. He said that it was not possible to attract big-name players as direct buyers, but larger operators such as Ryanair, British Airways and EasyJet would most likely be interested in the individual parts that were profitable from Flybe's business which could ultimately be discarded by the buyer.

Ryanair did not respond to a request to comment on the issue. However, Mr Simpson said the airline would face less obstacles related to competition from EasyJet or British Airways if they were all to look for parts of Flybe in terms of engraving.

It might be a special attraction for Ryanair, according to Mr. Simpson, it would be a slot to land Flybe at Manchester, Birmingham, Edinburgh and Schiphol airports. Flybe has a third of the slots in Birmingham, 19% of them in Manchester, 18% in Edinburgh – where Ryanair has built a presence to harm its exposure to Glasgow – and 2% of the landing area in Amsterdam.

Flybe slots at Heathrow are likely to attract British Airways, Simpson said.

The European aviation sector has seen some consolidation – with Ryanair buying Lauda and Lufthansa and EasyJet acquiring a share of Air Berlin – but more so as long as oil prices remain high putting pressure on smaller operator fuel costs.

Flybe is also understood to consider other options such as reducing costs and capacity.

Uncertainty over Brexit, a weaker British pound and rising fuel costs led the airline director to conclude that a takeover would likely be needed to maintain his future, according to reports.

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