Stobart Group, the aviation, energy and civil engineering group, provides the following update in relation to its investment in Connect Airways.
Connect Airways is made up of a consortium of shareholders encompassing Cyrus Capital (40%), Virgin Atlantic (30%) and Stobart Group (30%) that acquired the assets of Flybe. The shareholder consortium has to date provided £110m of funds to Connect Airways, and Stobart Group has invested £45m through a combination of cash and the sale of Stobart Air, Stobart Group's regional airline, and its aircraft leasing business, Propius.
The Connect Airways consortium has worked tirelessly alongside Flybe and the UK Government to look for solutions to ensure the financial viability of the airline so that consumers can continue to have confidence in flying with Flybe.
Following these discussions, it has been agreed that;
· As announced, the Government will review the application of Airline Passenger Duty (APD), with the intention to provide a further update at the time of the March Budget.
· The Government has further announced a review of regional connectivity. Government support for regional routes that connect key parts of the UK economy would further enhance the viability of UK domestic flight provision, as well as supporting economic growth in those regions.
· The Connect Airways consortium has committed to providing Flybe further short-term funding with Stobart Group contributing up to £9m of capital, with the funds drawn down only if required.
Background to the investment in Connect Airways
The combination of Flybe with Stobart Air and Propius provides the opportunity to establish a compelling proposition with a comprehensive regional network in the UK and Ireland while enabling Stobart Group to concentrate on its strategic focus for developing airport and aviation services assets.
The investment further provided the potential for growth at London Southend Airport, which is in turn owned by Stobart Group. On 13 November 2019, Flybe announced its intention to offer flights to 10 destinations from London Southend Airport from Summer 2020. These destinations are expected to attract circa 500,000 passengers annually to London Southend Airport.
However, though the Consortium announced its intention to acquire the assets of Flybe in January 2019, it did not receive merger control clearance from the European Commission for its acquisition of Flybe until 5 July 2019. The delay in receiving control, coupled with a number of other factors including legacy issues, impacted on the delivery of the Consortium's turnaround plan for Flybe. This resulted in a situation in which a further injection of funds is required to ensure continued flying.