The Landing of Flybe

Interim CEO Simon Laffin steps aside as Christine Ourmieres‐Widener joins as CEO. Christine has an engineering background and has been worked at Air France KLM, Cityjet and American Express.

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In the new year she is registered as a director for Flybe Group PLC and Flybe Limited.

Companies House - Christine Ourmieres‐Widener (external)

Today it is announced that Philip de Klerk the Chief Financial Officer, will leave on 1 October.

CEO Retweets an article with a comment about investors cheering because of the increase in share price.

See on Twitter (external)

Today it is announced that Ian Milne will become CFO from 1 Nov, having been the interim CFO since August. Previously he worked at British Airways/International Airlines Group.

Read more

He joins the the directorship of Flybe Group PLC, Flybe Limited, and Flybe.com Limited on 2 Nov.

Companies House - Ian Milne (external)

Press release is made about a new partnership with Amadeus having signed up for their Altea Suite, Amadeus e-Retail and Amadeus Anytime packages. Implementation is due to be completed by the end of 2018.

Read more on Flybe.com (external)

For such a technology related press release, surprisingly there is no mention of any CIO or CTO to drive the project.

Stobart make an announcement in relation to the share price of Flybe.

The Board of Stobart Group notes the movement in the share price of Flybe and press speculation as to a potential takeover of Flybe Group Plc byStobart Group.

The board released a statement shortly before market close

Flybe confirms that it has not received any approach from Stobart Group regarding a possible offer by Stobart Group for Flybe.

Make what could be interpreted as a contradictory statement

Flybe shareholders are strongly advised to take no action at this stage. There can be no certainty that any firm offer will be made nor as to the terms on which any firm offer might be made.

Then set a deadline for this "non approach"

In accordance with Rule 2.6(a) of the Code, Stobart Group must, by not later than 5.00 p.m. on 22 March 2018

The Board remains highly confident in the prospects of Flybe and believes that the Group continues to have an exciting future as an independent company.

Heather Lawrence joins as a non-executive director immediately joining the following committes:

• Nomination
• Remuneration
• Audit

She is to replace David Kappler who will retire following the AGM in September who is also the chair of the Audit Committee.

The Chairman acknowledges it has taken longer than expected to improve fleet size

We have finally started to bring down the fleet size, freeing ourselves from unwanted legacy aircraft orders, and setting a route network better fitted to customer demand.

Identifies the main challenges

Yet a number of headwinds, particularly the fall in the value of sterling and investment in the new digital platform, have put our costs up.

Defines risk mitigation strategies. Though no further mentioned of the "new digital platform"

We enter into hedging contracts to manage the volatility of the price of fuel and the value of sterling. We are looking at all other aspects of our supply chain to identify savings.

With a positive outlook

Flybe plays a vital role in UK regional connectivity. The Board believes that our new leadership and differentiated competitive positioning, combined with a more customer- focused culture and control over our own fleet size, will deliver continued progress and position us well to drive sustainable profitable growth in the future.

Today it is announced that Timothy Anderson will be replacing Luke Farajallah as COO at the end of October.

As part of this he steps down from the board of Flybe Group PLC at the end of this month.

Companies House - Timothy Anderson (external)

Today IAG announce in a press release that Vincent Hodder will be the CEO of LEVEL. The only mention of Vincent Hodder's departure from Flybe is in November with less than one line in the 2018/19 Half year results. He starts at LEVEL in September according to Bloomberg.

Vincent joined flybe in December 2015 as Chief Revenue Officer and became Chief Strategy Officer in October 2017.

His new employers have very positive words about his work at Flybe.

He is currently working as chief strategy officer at UK regional airline Flybe where he was instrumental in turning around revenue performance and refining the strategic direction of the business.

Read more (external)

With a record Q1 load factor of 81.3% a positive update is given

The year has started well. We are on track and looking forward to further progress towards sustainable profitability.

Whilst confirming that the strategy is working

The improvement in our revenue per seat continues to demonstrate the success of our commercial strategy and the record load factors show that passengers value the benefits of regional connectivity with Flybe

A positive update on the digital platform is also provided despite the fact that the CIO must have already put his notice in as he leaves sometime in September. Nothing is mentioned about his departure until November in the 2018/19 Half Year Results.

The implementation of the new digital platform is progressing well and is already being rolled out, to be operational in H2 2018/19.

There is also no mention of Vincent Hodder leaving Flybe despite the press release yesterday by IAG.

Read more

Appointments are planned ready for David Kappler's retirement after the AGM:

Liz McMeikan becomes Senior Independent Director and already on the following comittees:

• Nomination
• Audit
• Safety and Security
• Chair of the Remuneration

Heather Lawrence joins as Chair of the Audit Committee

Read more

Today the company twitter account tweets about new livery on the aircraft.

See on Twitter (external)

Surprisingly it fails to link to the article on the Flybe website identifying that the update is expected to take until 2025 at no additional cost.

Co-ordinated in line with its existing fleet re-painting and planned maintenance programmes, Flybe’s new white and purple livery will, as a result, be delivered at no extra cost to the business.

Read more at Flybe.com (external)

With a ≈57% shareholder turnout 16 items were voted on.

all of the resolutions were duly passed by shareholder

Particularly interesting were some of the latter items.

Chairman Simon Laffin joins the Safety and Security, he is already on the:

• Nomination Committee
• Remuneration Committee

Read more

CNN interview is not aired until almost 2 months later on Nov 15.

The CEO identifies a softening in the market whilst being confident with progress and the future of the company.

Stronger cost discipline is starting to have a positive impact across the business, but we aim to do more in the coming months, particularly against the headwinds of currency and fuel costs. We continue to strengthen the underlying business and remain confident that our strategy will improve performance.

By today further fuel (1.9%) and USD (0.7%) have been hedged. This is revealed in two days in the 2018/19 Half Year

As of 12^th November 2018, we had purchased 96.9% of our anticipated fuel requirements at USD606 and 74.7% of our anticipated US Dollar requirements at USD1.35 for H2

Recall back on 23 July it was said that 95% of fuel were hedged for H2 and 71% for H1 2019/20, though there is no mention of this H1 2019/20 figure in this update.

Two years of fuel prices in USD

See on indexmundi.com (external)

Two years of GBP/USD

Two years of fuel prices in GBP

See on indexmundi.com (external)

Board exploring a switch to LSE Standard listing

This would have the benefit of allowing the Company greater flexibility when considering divestments, particularly to recycle cash

They are also planning for the future 12 months out.

The directors have prepared a detailed trading budget and cash flow forecast for a period which covers at least 12 months from the date of this report.

More seats have also been sold than this time last year

Q3 is showing a positive improvement with 63% of seats sold (Q3 2017/18: 59%).

We also learn direct from Flybe that the CSO and CIO have left

Vincent Hodder, Chief Strategy Officer, and Peter Hauptvogel, Chief Information Officer have left the Company

After a positive feeling from the half year results a surprise a few minutes later

undertaking a comprehensive review of the various strategic options open to it to address the current challenges facing the airline industry and maximise value for shareholders. These options include further capacity and cost saving measures, initiatives to strengthen the balance sheet and preserve cash resources, as well as a potential sale of the Company through the commencement of a "formal sale process"

They appoint Evercore as a financial adviser. Did the CFO review the cash flow projections in advance of advisor appointments recognising their costs and payment terms?

After market close it was announced that part of the headqarters, Hangar 1 of the New Walker Hangar at Exeter International Airport has been sold. The buyer, Exeter & Devon Airport Limited paid £5m and would cost Flybe £10k/week to rent back

for a term of 25 years and an annual rent of £515,000 per annum

This hanger was opened on 4 May 2006 at a cost of £12m. Read more (external)

Watch video on CNN website (external)

The video recorded back on Sep 21 is released this evening by CNN. While the verbal message sounds positive the body language projects doubt and disbelief:

• Looks down at ground "I want flybe..."
• shakes head, shrugs shoulders "reference of a successful regional airline..."
• Rapid lean back with shrug "great place to work for"

Viewing the metadata of the CNN page reveals the exact time of publication, 18:15:12 GMT (13:15:12 EST). Though the London markets have closed, OTC trading in the USA is still active.

Flybe Group plc announces that today Flybe Limited, a wholly-owned subsidiary, completed on an agreement with Norddeutsche Landesbank Girozentrale (NordLB) (the "Agreement") to release $5 million of funds secured against a Bombardier Q400 turboprop aircraft G-JEDW ("Aircraft"). The funds will be repaid over three years and are drawn from an existing facility that was agreed with NordLB in 2015. As at 31 October 2018 the net book asset value of the Aircraft is £4.7 million.

This plane to be exact

Confidence in delivering on a public service obligation contract to provide services between LHR and NQY starting March 2019.

The Flybe board report they are in talks with more than just Virgin Atlantic.

confirms that Virgin Atlantic Airways Limited ("Virgin Atlantic") is one of the parties it is in discussions with as part of the formal sale process announced on 14 November 2018.

With an offer to give jobs to affected employees while expanding FAS operations

Flybe are sympathetic to the many employees of MAEL who may be affected by the loss of work at MAEL and will be offering employment opportunities for engineers at Birmingham and Manchester, increasing the size of Flybe bases at those locations and benefitting from establishing our own comprehensive maintenance operations.

The board is determined to cut administrative costs by switching to a standard listing.

If the Proposed Transfer does not occur because Shareholders do not vote in favour of the Resolution, then the Company will continue to maintain its Premium Listing and will not benefit from the reduction in administrative costs generally and the greater degree of regulatory flexibility that a Standard Listing would provide.

Headwinds are identified

These headwinds have included cost pressures arising from higher fuel prices, adverse currency movements, weaker consumer demand in domestic and near-continent markets and general unfavourable macroeconomic conditions, in part impacted by the uncertainty caused by ongoing Brexit negotiations.

Yet this contradicts the statements made 2 weeks ago in the 2018/19 Half Year Results as the company has already:

• Purchased 96.9% of the fuel for the next 12 months
• Hedged 74.7% of USD for the next 12 months

Reassurance is provided that no core activities will be divested.

the Company intends to strengthen its cash reserves by undertaking a programme of asset disposals and other financing measures, including possible sales and lease-backs of engines and aircraft and divestment of non-core activities, alongside its more ordinary course fleet financing and trading activities.

Chapter 10 rules add friction and administration costs to the divesting process given the ≈£47.9m market capitalisation as of yesterday

If the ratio equals or exceeds 25%, the transaction is treated as a “class 1 transaction” which requires the transaction to be subject to shareholder approval

Chapter 10 FCA rules identify how the market capitalisation is calcuated

the figure used to determine market capitalisation is the aggregate market value of all the ordinary shares (excluding treasury shares) of the listed company at the close of business on the last business day before the announcement.

As of Nov 26 the directors hold 871,664 Ordinary Shares (0.4%) and will be voting in favour and recommends all shareholders do so too.

The Board considers that the Proposed Transfer is in the best interests of Shareholders as a whole and, accordingly, unanimously recommends that all Shareholders vote in favour of the Resolution at the General Meeting.

Part 2 provides a summary of the differences between standard and premium listings.

Companies with a Standard Listing are not required to comply with Chapter 12 of the Listing Rules, which applies to companies dealing in their own securities...

As set out in paragraph 4 of Part I, the Company has stated its intention voluntarily to continue to comply with the requirements of Chapter 12 of the Listing Rules. The Company will be free as a company with a Standard Listing to change its intentions at any time without prior shareholder approval.

Companies with a Standard Listing are not required to obtain the approval of shareholders for the cancellation of the listing.

Shareholders vote in an overwealming majority (99.72%) to support the transfer from a premium to a standard listing.

As per FCA rule 5.4A.4 (3) (b) only 75% majority is required

FCA handbook - Listing Rules (external)

With ≈65m votes and ≈217m vote rights only 30% of shareholders voted. Contrast this with the voting figures at the AGM.

• Why did so few shareholders vote on such a significant corporate action?
• Of those that did vote which way did they vote?

The 2017/18 Annual report released in june shows the holdings of the largest shareholders.

2017/18 Annual Report (page 61)

With ≈71% ownership it would appear that not all large shareholders voted.

FCA regulation DTR 5.1.2 (1) require notifications to be released if shareholders pass certain thresholds. By referring to the appropriate RNS' post June 14^th it is possible to calculate with some level of certainty the number votes available to the large investors.

FCA handbook - Disclosure and Transparency Rules (external)

First however it is important to verify that the annual report holds the correct numbers.

According the the RNS releases ≈90% of flybe is held by the large investors. The annual report appears to be missing 3 large investors accounting for ≈20% of the voting rights. Further more it appears to overstate the Hoskings holding by 3%. There should be notifications available for each 1% change. Which of these values is correct?

By the EGM vote shareholding has changed significantly with large investors accounting for at most 50% of shareholders.

Still it is clear that not all large shareholders voted, in particular the numbers only begin to match vote results if Hoskings Partners did not vote.

What about retail shareholders? It would appear that few if any retail shareholders got the opportunity to vote. Shareholders who have contacted their brokers appear to have been told one of two messages:

• The information was not issued by the company
• The information did not suggest any corporate event

Virgin Atlantic Limited ("Virgin Atlantic") confirms that it continues to review its options in respect of Flybe including potentially making an offer for Flybe.

RNS Downloaded from Flybe website, with the flybe logo at the top but written by Virgin Atlantic Limited

Despite providing an update that only virgin is continuing talks an RNS prior to market open confirms the media speculation yesterday.

the Boards of Flybe and Connect Airways announce that they have reached agreement on the terms of a recommended cash offer for Flybe by Connect Airways pursuant to which Connect Airways will acquire the entire issued and to be issued share capital of Flybe.

They value the company at £2.2m, shareholders (many of whom are also employees) will get 1p per share.

Connect Airways is a joint venture company the share capital of which is owned 40% by DLP Holdings, S.à. r.l., a company wholly-owned by funds managed by Cyrus, 30% by Stobart Aviation, a wholly-owned subsidiary of Stobart Group, and 30% by Virgin Travel Group Limited, a wholly-owned subsidiary of Virgin Atlantic, the holding company of Virgin Atlantic Airways Limited and Virgin Holidays Limited.

Filings at companies house do not support this statement

The CEO blames:

• "higher fuel costs" - Remember they've already purchased 90% of the fuel for the next 12 months
• "currency fluctuations" - Remeber they've already hedged 52.6% of USD for the next 12 months
• "uncertainties presented by Brexit" - So has everyone stopped flying because of uncertainties?

However, the industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit. We have been affected by all of these factors which have put pressure on short-term financial performance. At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows.

This is also the first communication identifying "adverse cashflows" and contradicts what has been on the Flybe website since the Stobart offer.

After resolving the major legacy issues, we can now focus all of our resources on making the business more resilient and customer-focused.

taking into account Flybe's current difficult financial position and the expectation that the pressure on Flybe's cash flow will continue

Less than 2 months ago the directors released their 2018/19 Half Year Results and had performed a cash flow forecast for a period covering at least 12 months. Recall There was no mention of being in a "difficult financial position".

Minutes before market close an RNS is released announcing the sale of Gatwick slots to Vueling Airlines for £4.5m. Note that Flybe Limited, not Flybe Group own the slots.

Flybe Group plc announces that today Flybe Limited, a wholly-owned subsidiary, signed an agreement with Vueling Airlines S.A. (the "Agreement") to receive a total of £4,500,000 (four-and-a-half-million pounds) in respect of slots at London Gatwick Airport.

No shareholder approval was required for this sale as it represents <13% of yesterday's market capitalisation of ≈£35m (216,656,776 shares, closing price 16.375GBX).

Though the transaction was below the Class 1 threshold it was above the Class 2 threshold.

Class 2 transaction: a transaction where any percentage ratio is 5% or more but each is less than 25%

FCA regulations require notification to a Regulatory Information Service (RIS) such as an RNS to be released with certain information about the class 2 transaction.

A listed company must notify a RIS as soon as possible after the terms of a class 2 transaction are agreed.

While the RNS notes that there will be two payments it fails to identify:

• how much is recievable immediately
• how much is deferred
• the terms of the arrangements

An example of what should have been released can be seen from Flybe back in May 2013 when exchanging Gatwick slots with EasyJet

After market close confirmation is posted that the transfer will take place on 17 Jan.

Unable to satisfy the requirements of the previous Bridge Facility Agreement, a new agreement is reached which on the Jan 17 will turn Flybe Group PLC into little more than a shell company.

purchase by Connect Airways of the Group's main trading company, Flybe Limited (including Flybe Aviation Services Limited) and the digital company Flybe.com Limited for £2.8 million

Along with funding to keep Flybe Limited (not Flybe Group PLC) a going concern until the long stop date of Feb 22.

a revised Bridge Facility of up to £20 million to provide funding to Flybe Limited, of which £10 million will be released today to support the business. In addition, a number of improved agreements with banks have also been reached today to improve liquidity.

Being a premium listed company divestment worth more than 25% of the market capitalisation requires shareholder approval.

This sale represents 31% of yesterday's market capitalisation of ≈£8.9m (216,656,776 shares, closing price 4.12GBX) Hence the deal will not go through until after the switch in listing.

Flybe confirms that following its transfer to a Standard Listing which becomes effective on 17 January 2019, the Divestment will not require shareholder approval.

Today an RNS is released to clarify the core asset divestment process.

On 15 January 2019, Flybe announced that it had agreed to sell all its operating businesses, Flybe Limited and Flybe.com Limited, to Connect Airways subject only to a limited number of conditions. These conditions are set out in section 5 of the share purchase agreement (the "SPA") between Flybe and Connect Airways.

This appears to be the first mention of a share purchase agreement of SPA.

The SPA was also dependent upon Flybe Group plc moving to a Standard Listing, which was completed on 17 January 2019.

Why was a standard listing required for the SPA? Given the FCA had to be notifed 20 days before intention to change listing, was it a coincidence that the process had already been performed?

Further information is given about what the purpose of the vote is though some may interpret this to be a mixed message given the doubt in the first bullet, followed by resonable assurance in the second bullet.

• If the sale of the operating businesses is completed, Flybe Group plc will then be a non-trading entity with neither subsidiaries nor other material assets
• The sale of Flybe's operating businesses is expected to complete before the Scheme vote
• Once the sale completes, the Scheme vote will relate purely as to whether to approve an offer of 1p per Flybe Group plc share, payable direct to shareholders by Connect Airways.

The SPA was also dependent upon Flybe Group plc moving to a Standard Listing, which was completed on 17 January 2019.

An RNS is released confirming Hoskings is seeking an EGM

Hosking Partners LLP has requested that the Company convene a general meeting to consider resolutions to appoint Eric Kohn as a Director of the Company and remove Simon Laffin as a Director of the Company

Though no notice for an EGM appears to be given.

The Board continues to have full confidence in its Chairman, Simon Laffin, and believes that any independent scrutiny of its conduct will support the Board's decision-making