Flybe and Ryanair agree deal to create new airline Flybe Ireland
Exeter-based Flybe's board has agreed a 100-million-euro deal that could create a new business, Flybe Ireland.
In an update issued to the stockmarket yesterday, Flybe said that its board had approved an agreement to fly 43 short-haul Aer Lingus routes, if Ryanair's takeover bid of the Irish carrier is successful.
The proposal forms part of Ryanair's attempt to persuade the European Commission that its planned £596.7 million takeover of Aer Lingus will not harm competition for Irish passengers.
Under the deal, agreed in principle earlier this week, Flybe will receive a minimum of nine Airbus A320 aircraft and a cash injection of worth around £85.9 million from Ryanair.
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The newly created Flybe Ireland will operate from bases in Dublin and Cork, with many of the 34 European destinations served by the 43 routes already used by Flybe's UK business.
Ryanair will give Flybe the right to use the Aer Lingus brand for three years and will develop a business plan that should provide £17.2 million in pre-tax profits in the 12 months following the transfer.
The deal comes a month before the European Commission is due to give a decision on Ryanair's bid for Aer Lingus. Should the budget carrier succeed with its takeover, Flybe Ireland is expected to commence operations in time for the winter season.
Flybe chairman and chief executive Jim French said: "This development of creating a Dublin based airline is in line with the Company's stated strategy at the time of IPO – which was to diversify away from reliance upon the UK economy.
"Flybe would be proud to have the chance to serve the Irish markets, and would be, as we seek to be throughout the rest of Europe, a good employer and corporate citizen.
"However, before Flybe Ireland can come into being, there are many hurdles to overcome, not least the EC accepting the remedies offered by Ryanair in its offer to take over Aer Lingus, and then the shareholders of Aer Lingus accepting an offer from Ryanair."
Flybe UK is set to continue to implement its £35 million cost-saving "turnaround plan" announced last month, with analysts predicting it will post pre-tax losses of £17 million for the 12 months to March 31. In a restructuring programme, which will see 95 Exeter jobs among 300 UK-wide redundancies, the airline is focused upon rebalancing its business away from a dependence upon the UK domestic flights market, which has been impeded by rising Air Passenger Duty charges and spiralling fuel costs.
Last month, Flybe announced plans to consolidate its Exeter-based aircraft maintenance business and Training Academy with the contract flying service it delivers on behalf of other European airlines, to form a new division – Flybe Outsourcing Solutions – offering a one-stop shop package for other airlines aiming to streamline their own expenses by concentrating on long-haul flights.
Mr French revealed at the time Flybe was in "advanced talks" over potential deals with two undisclosed European carriers.