13/01/2020

Is Flybe on the brink?

Is Flybe on the brink?

UK regional airline Flybe is in crisis talks as it tries to secure emergency funding, according to a report by Sky News.

The British government is considering supplying the airline with additional funding, while accountancy firm EY is “on standby” to handle the airline’s potential administration, Sky News reports, citing unnamed sources.

Exeter-based Flybe, the UK’s largest regional airline, has been on lessor watchlists since its near-collapse at the beginning of 2019. The airline accepted a last-minute bailout from Connect Airways – a joint venture between Virgin Atlantic, UK infrastructure giant Stobart Group and Cyrus Capital Partners (Cyrus) – in a £2.8 million ($3.6 million) deal that saw its equity valued at just a penny a share. The previous day’s closing price had been 16.38p. Under the deal, Flybe is to be rebranded as Virgin Connect in 2020.

Cyrus is the largest shareholder of the joint venture at 40%, with Virgin Atlantic and Stobart Group taking 30% each. Connect Airways also supplied an £80 million ($103.7 million) injection, along with a £20 million ($25.9 million) loan, to assist Flybe in its restructuring.

Flybe has blamed its weak financial position on a weak pound and political uncertainty following Brexit, as well as rising fuel costs.

Flybe said it is continuing "to provide great service and connectivity for our customers while ensuring they can continue to travel as planned" and that it does not "comment on rumour or speculation" when contacted by Ishka. Virgin Atlantic similarly told Ishka it is “not commenting on speculation”. Stobart did not have any comment when connected by Ishka. EY and Cyrus did not respond to Ishka’s request for comment. 

 

A Q400-heavy fleet

 

Flybe currently operates a fleet of 72 aircraft of which 72% are leased, according to CAPA Fleets. Nordic Aviation Capital (NAC) has the highest single exposure to Flybe with 20 aircraft, or 38% of Flybe’s leased fleet.  All of NAC’s leased Flybe fleet, bar one ERJ175, are Q400s with an average age of 12 years.

 

Flybe Fleet (13th January 2020)
Lessor/Owner Manager Aircraft MSN Reg. Number Age Engine Model Notes
Avation Avation ATR 72-600 1277 G-FBXB 4.333 PW127M Last commercial flight 21st December 2019
Avation Avation ATR 72-600 1260 G-FBXA 4.333 PW127M Parked at Exeter. Last active 8th November 2019.
Chorus Aviation Chorus Aviation DHC-8Q-400 4216 G-ECOF 11.583 PW150A
Chorus Aviation Chorus Aviation DHC-8Q-400 4221 G-ECOH 11.5 PW150A
Chorus Aviation Chorus Aviation DHC-8Q-400 4224 G-ECOI 11.417 PW150A
Chorus Aviation Chorus Aviation DHC-8Q-400 4230 G-ECOK 11.333 PW150A
Chorus Aviation Chorus Aviation DHC-8Q-400 4237 G-ECOO 11.167 PW150A
Flybe Flybe DHC-8Q-400 4077 G-JEDM 16.75 PW150A
Flybe Flybe DHC-8Q-400 4085 G-JEDP 16.167 PW150A
Flybe Flybe DHC-8Q-400 4087 G-JEDR 16 PW150A
Flybe Flybe DHC-8Q-400 4088 G-JEDT 15.917 PW150A
Flybe Flybe DHC-8Q-400 4090 G-JEDV 15.75 PW150A
Flybe Flybe DHC-8Q-400 4093 G-JEDW 15.583 PW150A
Flybe Flybe DHC-8Q-400 4180 G-ECOA 12.25 PW150A
Flybe Flybe DHC-8Q-400 4185 G-ECOB 12.83 PW150A
Flybe Flybe DHC-8Q-400 4187 G-PRPA 12.83 PW150A
Flybe Flybe DHC-8Q-400 4191 G-PRPG 12 PW150A
Flybe Flybe DHC-8Q-400 4195 G-PRPF 11.917 PW150A
Flybe Flybe DHC-8Q-400 4204 G-PRPI 11.75 PW150A
Flybe Flybe DHC-8Q-400 4209 G-PRPE 11.667 PW150A
Flybe Flybe DHC-8Q-400 4212 G-ECOE 11.667 PW150A
Flybe Flybe DHC-8Q-400 4323 G-PRPH 9.583 PW150A
Flybe Flybe DHC-8Q-400 4332 G-PRPD 9.417 PW150A
Flybe Flybe DHC-8Q-400 4333 G-PRPB 9.333 PW150A
Flybe Flybe DHC-8Q-400 4338 G-PRPC 9.25 PW150A
Flybe Flybe DHC-8Q-400 4380 G-PRPL 8.5 PW150A
Flybe Flybe ERJ175 17000359 G-FBJK 6.833 CF34-8E5G01
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4179 G-JECZ 12.25 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4197 G-ECOC 11.917 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4201 G-KKEV 11.833 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4206 G-ECOD 11.75 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4220 G-ECOG 11.5 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4229 G-ECOJ 11.333 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4233 G-ECOM 11.25 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4251 G-ECOT 10.917 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4257 G-FLBC 10.75 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4259 G-FLBD 10.75 PW150A
HEH Aviation Management HEH Aviation Management DHC-8Q-400 4261 G-FLBE 10.667 PW150A
Hong Kong Aviation Capital Falko ERJ195 19000143 G-FBEI 12.83 CF34-10E7G07 Parked at Exeter. Last commercial flight 17th December 2019.
Nordic Aviation Capital Nordic Aviation Capital ERJ175 17000344 G-FBJG 7.667 CF34-8E5G01 Last commercial flight 11th November 2019
Nordic Aviation Capital Nordic Aviation Capital ERJ175 17000351 G-FBJH 7.333 CF34-8E5G01 Parked at Exeter. Last commercial flight 23rd November 2019.
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4113 G-JECK 14.167 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4114 G-JECL 14.83 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4118 G-JECM 13.917 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4120 G-JECN 13.833 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4126 G-JECO 13.583 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4136 G-JECP 13.25 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4139 G-JECR 13.167 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4155 G-JECX 12.833 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4157 G-JECY 12.833 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4188 G-PRPM 12.83 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4203 G-PRPK 11.833 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4213 G-PRPN 11.667 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4214 G-PRPO 11.583 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4242 G-ECOP 11.83 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4248 G-ECOR 11 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4253 G-FLBA 10.667 PW150A
Nordic Aviation Capital Nordic Aviation Capital DHC-8Q-400 4255 G-FLBB 10.833 PW150A
Nordic Aviation Capital (Sublessor: Republic Airlines) Nordic Aviation Capital DHC-8Q-400 4202 G-PRPJ 11.833 PW150A
Ravelin Jet Leasing 1 Ltd Falko ERJ195 19000120 G-FBEG 12.25 CF34-10E7G07 Last commercial flight 26th October 2019
Ravelin Jet Leasing 1 Ltd Falko ERJ195 19000155 G-FBEJ 11.917 CF34-10E7G07
Ravelin Jet Leasing 1 Ltd Falko ERJ195 19000128 G-FBEH 12.25 CF34-10E7G07 Parked at Exeter. Last commercial flight 17th December 2019.
Ravelin Jet Leasing 1 Ltd Falko ERJ195 19000168 G-FBEK 11.833 CF34-10E7G07
Unknown Lessor Unknown Lessor DHC-8Q-400 4089 G-JEDU 15.917 PW150A
Unknown Lessor Unknown Lessor ERJ175 17000326 G-FBJA 8.583 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000327 G-FBJB 8.583 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000328 G-FBJC 8.583 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000329 G-FBJD 8.417 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000336 G-FBJE 7.833 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000341 G-FBJF 7.667 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000355 G-FBJI 7.167 CF34-8E5G01
Unknown Lessor Unknown Lessor ERJ175 17000358 G-FBJJ 6.833 CF34-8E5G01
Source: CAPA Fleets, Flightradar24.

CAPA Fleets.

Click here to download the table.

 

Three-quarters (75%) of Flybe’s current fleet and two-thirds (66%) of its leased fleet are midlife Q400 aircraft with an average age of 12.1 years. 14% are Embraer 175s and 7% 195s with an average age of 7.9 years and 12.2 years respectively; Flybe announced in April 2019 that it would be phasing Embraer aircraft out of its fleet through 2020. The airline, which began life in 1979 as Jersey European Airways, has been in the process of reducing its fleet count to 70 in 2020, down from a May 2017 peak of 85 aircraft. The remaining 4% of the fleet comprises of ATR 72-600s with an average age of 4.2 years.

Five of Flybe’s leased aircraft are currently parked or stored, according to CAPA Fleets: one ATR 72-600 managed by Avation (MSN 1260); three Falko ERJ195s (MSN 19000143, 19000128, 19000155); and one ERJ175 leased from NAC.

 

The Ishka View

 

Flybe has been an airline of concern for a few years now, only surviving a near-collapse at the beginning of 2019 by accepting a cut-throat undervaluing of its assets and operations. Lessors with aircraft placed with the airline are likely to have been prepared for the possibility that Flybe could fall over.

If reports are true that Flybe is indeed in danger of collapse, then this is would be particularly bad news for lessors with Q400s. According to CAPA Fleets, Flybe flies 10% of the world’s active Q400 fleet, meaning any potential bankruptcy would flood the market and make it challenging for lessors to achieve competitive lease rates on their repossessed aircraft – or any other mid-life Q400s for that matter. Lease rates for 10 to 12-year-old Q400s were around $190,000 at the beginning of last year, Ishka reported (see Insight: ‘Turboprop leases rates: Fewer lessors help ATR and Q400 lease rates stabilise’).

As for Flybe’s Embraer jets, the UK regional airline is not the only one to be phasing out E195s. Other carriers, including JetBlue, Copa Airlines, American Airlines and Azul, plan to remove the jets from their fleet by 2025 (see Insight: ‘Used Embraer E190/E195 E1 lease rates to come under pressure’). Lessors repossessing E195s and looking to re-market them can expect heavy competition.

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