ALEX BRUMMER: Virgin swoops to Flybe’s rescue.

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There is reason for passengers of Flybe to be relieved that the Exeter-based carrier has ended up in relatively safe hands in the form of Richard Branson


When it comes to airlines, Sir Richard Branson and his team have demonstrated a good touch. 

So there is reason for passengers of Flybe to be relieved that the Exeter-based carrier has ended up in relatively safe hands.

Investors who have watched the shares plummet from 140p four years ago to 40p a year ago and a buyout price of just one penny a share will feel aggrieved.

But with the carrier indebted up to the turbines, it was a case of rescue or administration.

There is reason for passengers of Flybe to be relieved that the Exeter-based carrier has ended up in relatively safe hands in the form of Richard Branson's Virgin

There is reason for passengers of Flybe to be relieved that the Exeter-based carrier has ended up in relatively safe hands in the form of Richard Branson’s Virgin

The Unite union is right to worry about job security for members at Flybe and there is a case to be made, as with most companies, of more worker engagement at all levels.

But in this case the staff should be satisfied that they are still in the air.

Flybe has a credible business model with its flights from smaller airports such as Southend and Southampton.

From a consumer viewpoint it can be a more pleasant experience than an overcrowded Gatwick and uncivilised Luton.

Branson and his management team have a surprisingly good record of founding regional carriers.

Virgin Blue, which began with a single discount flight from Brisbane to Sydney, is now Australia’s second largest airline after Qantas. 

It has been renamed Virgin Australia and is linked into Virgin Atlantic’s wider services. In the US, Virgin America began as a West Coast airline operating out of San Francisco, was bought out by Alaska Airlines and renamed Virgin Alaska.

It links in with Virgin Atlantic, where Delta is a 49 per cent holder.

The trick for Branson and his team is to make the brand sufficiently successful for him to sell on but retain an income stream from licensing the Virgin name.

A previous bet by Virgin on the UK domestic market met with failure. But Flybe, with 9.5m passengers a year using secondary airports, has a better survival chance. 

The cost of the current investment is to be shared with volatile Southend Airport owner Stobart and venture capital outfit Cyrus.

The big opportunity is ‘code sharing’ weaving Flybe’s domestic UK and European routes into the broader Virgin Atlantic, Delta and Singapore hubs and spokes.

It is unfortunate that Flybe’s chief executive Christine Ourmieres-Widener felt the need to blame Brexit for the airline’s woes.

We know from the problems of other carriers, including Britain’s Monarch, Air Berlin and Lauda, that the real enemy of smaller carriers is the pricing power of no-frills carriers Ryanair and EasyJet, fluctuating fuel costs and currency turbulence.

The rebirth of Flybe as Connect, with perhaps some Virgin gloss, looks promising.

Greedy gurus

Not so long ago, fund managers were technical, backroom stock-pickers rather than stars commanding vast salaries and bonuses. Investment gurus Neil Woodford and Terry Smith are in a different category.

They are entrepreneurs as well as fund managers, risking their own capital in setting up independently.

In so doing they should be well rewarded. It ought to be hard for anyone to have much of a quarrel with Fundsmith, founded by Smith. His analytical skills are legion and he famously has often leaned against the conventional wisdom. 

He has brought that clarity to Fundsmith’s strategies. Those investors who chose to follow him from the start have seen a stupendous 269.6 per cent gain. But his decision to take up to £62million out of the firm in pay and dividend is rapacious.

Woodford is equally troubling. He brought to his funds Woodford Equity Income and Woodford Patient Capital a great reputation from previous employment at Invesco Perpetual, and is carefully listened to in the City. 

But his funds have spluttered, leaving investors (including this writer) losers. One accepts that if you put your money into something called ‘Patient’ there will not be instant returns.

But that rule should also apply to the great man and his partners who have extracted £37million. That is unacceptable.

Great escape

Mike Ashley may have inadvertently done Sir Ian Cheshire a favour by helping to oust him as chairman of Debenhams. 

It removes the former Kingfisher boss from the danger of a besmirched reputation if the marauding Sports Direct proprietor gets up to mischief.

More significantly it will calm the nerves of the Bank of England, which approved Cheshire as chairman of Barclays’ ring-fenced bank on condition he chucked in some of his other jobs. Very neat.

 



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