Flybe crashes into administration
5 Mar 2020
EY has been brought in as administrator to regional airline Flybe which has collapsed, just two months after a government rescue plan, with the loss of 2,400 jobs
5 Mar 2020
Alan Hudson, Joanne Robinson, Simon Edel and Lucy Winterborne of EY’s restructuring team were appointed joint administrators of Flybe Ltd following insolvency proceedings.
An independent British-based airline headquartered in Exeter, Flybe is the largest independent regional airline in Europe carrying around 8m passengers a year between 81 airports across the UK and the rest of Europe, with over 210 routes across 15 countries.
It employs approximately 2,400 staff across the UK, the majority of whom have been made redundant. Flybe has ceased trading and all flights have been grounded, nor will any alternative arrangements be offered to passengers who had booked tickets.
EY administrators said: ‘Financial support for the company has been withdrawn and Flybe will not be able to reschedule flights.’ Passengers are advised to visit the Civil Aviation Authority (CAA) and Flybe websites for further information.
The airline was in financial difficulties over a year ago, with reported losses of £20m, and was bought by Connect Airways – a consortium of Virgin Atlantic, Stobart Air and the hedge fund Cyrus Capital.
In January, the new owners said they would pump £30m into the business to keep it afloat, but appealed to the government for additional support.
At the time, Flybe revealed it had negotiated a ‘time to pay’ arrangement with HMRC over some £10m of airline passenger duty (APD) payments owing.
The government began investigating a rescue package, to include a £100m loan and the prospect of reductions in APD in the forthcoming Budget.
However, these plans did not come to fruition as further investigation found APD could not be cut in the UK until January 2021 at the earliest, after the scheduled end to the Brexit transition period.
It was not possible to offer a targeted tax cut as under EU rules, anything done before then would have to apply to flights to Europe rather than just the UK. In addition, the airline did not meet the necessary criteria to access a government loan.
In a statement, Flybe chief executive, Mark Anderson, said the company had made ‘every possible attempt’ to avoid collapse but had been ‘unable to overcome significant funding challenges’.
He also indicated the outbreak of Coronavirus had contributed to the airline’s problems, as passenger bookings had fallen.
Alan Hudson, EY partner and restructuring leader and joint administrator, said: ‘Despite an agreement with the government to provide assistance to the company, added pressures on the travel industry in the last few weeks have further deepened the severity of its financial situation.
‘Flybe had already been impacted by rising fuel costs, currency volatility, and market uncertainty.
‘As well as carrying out our duty as administrators, we are also supporting Flybe’s employees and customers at this incredibly difficult time.’
During the airline’s earlier financial problems, it emerged that its pension scheme may be at risk as a result of a collapse. Flybe’s pension fund, which has over 1,000 members and £170m of retirement liabilities, is registered in the Isle of Man, rather than the UK.
This means scheme members are not entitled to payments from the Pension Protection Fund (PPF) in the event of an insolvency. Flybe had a £11.6m pension shortfall in November 2018.