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BA Connect - Flybe: BA's 15% Stake And The Future  
User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Posted (8 years 1 month 2 weeks 5 days 6 hours ago) and read 6254 times:

While the original thread is primarily focused on the news of the merger, I would like to discuss the future for the entity that is formed out of the merger.

After reading an article in The Telegraph and then reading Willie Walsh's comments regarding BA's 15% stake in Flybe, I was very surprised to read the following from Mr Walsh's statement:

"This is a long-term investment"*

*Source:The Telegraph

What does Willie Walsh mean when he talks of a "long term investment" in flybe? Should we read anything into this?

I was wondering what your views/opinions are on this. Is BA's 15% stake in Flybe for pure financial gain, in terms of recouping some of the losses from BA Connect...or could this be the start of a process which will see a closer BA/Flybe relationship, thus allowing BA to retain a different type of presence in the regions?

Instead of


Could we see...


What do you think?

18 replies: All unread, jump to last
 
User currently offlineBA319-131 From United Kingdom, joined Jan 2001, 8589 posts, RR: 54
Reply 1, posted (8 years 1 month 2 weeks 5 days 5 hours ago) and read 6229 times:
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Quoting Concorde001 (Thread starter):
Is BA's 15% stake in Flybe for pure financial gain, in terms of recouping some of the losses from BA Connect...or could this be the start of a process which will see a closer BA/Flybe relationship, thus allowing BA to retain a different type of presence in the regions?



Quoting Concorde001 (Thread starter):
What do you think?

- Flybe have done very well to increase market share and growth in the UK airlnie market. I imagine BA have noted this and see Flybe as a potential partner to bring BA passenger to areas not currently served. Whilst I don't see Flybe planes being repainted into BA c/s, a codeshare deal could be the longterm way to go.



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User currently offlineSK736 From United Kingdom, joined Aug 2006, 538 posts, RR: 0
Reply 2, posted (8 years 1 month 2 weeks 5 days 5 hours ago) and read 6195 times:
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BA clearly wants rid of Connect and a sale to Flybe is probably an answer to Walsh's prayers. However, I suspect that Flybe were either not in a position or willing to stump up all the cash so giving BA a 15% equity stake in the combined company seems like a sensible solution. Flybe is clearly better placed than BA to operate low-cost, short-haul operations so why wouldn't BA want a part of it.

User currently offlineJetset7E7 From United Kingdom, joined Jul 2004, 1090 posts, RR: 15
Reply 3, posted (8 years 1 month 2 weeks 5 days 4 hours ago) and read 6172 times:



Flybe plans to accelerate its current fleet renewal programme and will phase out all of the existing BA Connect fleet as soon as possible. The current Flybe £1.2bn investment programme in Bombardier Q400 and Embraer 195 aircraft will be complete by 2009. At that time Flybe will have a fleet of 82 aircraft, which will be one of the youngest and most environmentally sensitive fleets in the world.

BA will ensure that the new business has sufficient funding in order to achieve its growth targets and the transition out of the current BA Connect fleet. In return it will acquire a 15% stake in the new business.

-The new larger Flybe will have the following dimensions:
-159 Routes, including 35 new routes
-10 Million Passengers
-£600m in revenues
-Europes largest regional airline
-Operating from 23 UK and 36 European airports
-70 aircraft by the end of 2007

Mark



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User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 4, posted (8 years 1 month 2 weeks 5 days 4 hours ago) and read 6136 times:

Quoting BA319-131 (Reply 1):
Whilst I don't see Flybe planes being repainted into BA c/s, a codeshare deal could be the longterm way to go.

Thanks for your comments - do you think codesharing could see Flybe become part of oneworld? I know BA have said Flybe will not join the alliance, but I am thinking long term. If BA's stake is 'long term', could alliance membership follow? Or will BA have a relationship similar to IB's and Clickair?

Quoting SK736 (Reply 2):
Flybe is clearly better placed than BA to operate low-cost, short-haul operations so why wouldn't BA want a part of it.



Quoting Jetset7E7 (Reply 3):
BA will ensure that the new business has sufficient funding in order to achieve its growth targets and the transition out of the current BA Connect fleet. In return it will acquire a 15% stake in the new business.

Thank you both for your comments.

Clearly BA now has a part of Flybe, but I am interesting in the significance of this part. Is this a re-run of BA's decision to set up/have a stake in an LCC carrier (Go), only to sell it off after?


User currently offlineHumberside From United Kingdom, joined Dec 2005, 4927 posts, RR: 4
Reply 5, posted (8 years 1 month 2 weeks 5 days 4 hours ago) and read 6113 times:

Im surprised BA have said its a long term investnemt. I wopuld expect them to sell it or at least reduce it when Flybe float on the stock exchange in a couple of years time


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User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 6, posted (8 years 1 month 2 weeks 5 days 4 hours ago) and read 6104 times:

Quoting Humberside (Reply 5):
I wopuld expect them to sell it or at least reduce it when Flybe float on the stock exchange in a couple of years time

That is what I thought, but Willie Walsh said the follwing to The Telegraph:

"Willie Walsh, BA's chief executive, said there was no arrangement for the 15pc stake should Flybe not float. "This is a long-term investment," he said."

Very interesting...


User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 7, posted (8 years 1 month 2 weeks 5 days 3 hours ago) and read 6091 times:

Also, I've just done some quick arithmetic and it seems BA will lose 10% of its current customers with the sale of BA Connect - it carried 3.5 million customer this year whereas BA carried approx 35 million. That is quite alot!

User currently offlineHumberside From United Kingdom, joined Dec 2005, 4927 posts, RR: 4
Reply 8, posted (8 years 1 month 2 weeks 5 days 3 hours ago) and read 6078 times:

Perhaps BA do have some interest in the regions or maybe they believe in the Flybe business model and are making a long term investment? Or could they be just wanting to make sure Flybe dont start any new flights to London? Will be very interesting to see what happens

Are BA appointing any directors to the Flybe board?



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User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 9, posted (8 years 1 month 2 weeks 5 days 3 hours ago) and read 6061 times:

Quoting Humberside (Reply 8):
Are BA appointing any directors to the Flybe board?

That is a very good question - is it common for companies to appoint directors after acquiring a large minority stale (if that makes any sense  Wink )

Quoting Humberside (Reply 8):
Will be very interesting to see what happens

I couldn't agree more. If we consider that Flybe will probably carry 10 million passengers once the merger is complete, BA could gain significantly.

However, even though Willie Walsh has said this is a long term investment, I doubt it will be longer than five years. BA were making a big fuss about its low cost carrier GO in 2002, saying it wasn't part of its 'core business', much like BA Connect...and we all know what happened there!

To be honest, I am in two minds about this...while the above situation may be likely, I can't help but think that Flybe presents BA with an opportunity to maintain a profitable presence within the British regions.


User currently offlineHumberside From United Kingdom, joined Dec 2005, 4927 posts, RR: 4
Reply 10, posted (8 years 1 month 2 weeks 5 days 3 hours ago) and read 6043 times:

Willie Walsh might be saying its a long term investment, but Ive just seen this from The Times - Martin Broughton is saying the stake will be sold when Flybe floats

Quote:
BA also incurred a £106 million loss on the sale of its unprofitable BA Connect operations to flybe. BA will emerge from the deal with a 15 per cent stake in flybe. Flybe hopes to raise £100 million in a flotation next year.

Martin Broughton, chairman of BA, told analysts that the airline plans to dispose of its stake when flybe floats.



Quoting Concorde001 (Reply 9):
Quoting Humberside (Reply 8):
Are BA appointing any directors to the Flybe board?

That is a very good question - is it common for companies to appoint directors after acquiring a large minority stale (if that makes any sense )

Its certainly a significant stake - and if they do appoint a director it might be a sign that BA intend to be actively involved in Flybe and its more than just a financial investment - at least thats what I wouldn interpret it as



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User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 11, posted (8 years 1 month 2 weeks 5 days 3 hours ago) and read 6010 times:

Quoting Humberside (Reply 10):
Willie Walsh might be saying its a long term investment, but Ive just seen this from The Times - Martin Broughton is saying the stake will be sold when Flybe floats

That is weird, there seem to be many conflicting reports - for example The Times is reporting the following statement made by BA Spokeswoman when asked if BA's sale of the regional arm was a defeat?:

"We have to look at the airline as a business. There are plenty of other airlines in the regions and we are finding ways to operate differently. It is not a white flag: there lots of ways we can compete."*

*Source: The Times

What on earth does that mean?


User currently offlineShamrock_747 From , joined Dec 1969, posts, RR:
Reply 12, posted (8 years 1 month 2 weeks 5 days 2 hours ago) and read 5978 times:

I think the flybe brand will be kept completely separate from BA. Had BA wanted to keep a presence on flights from the regions I believe BACON would have been retained with a limited network and a refined business model cutting costs even further. There would also be risk of diluting the BA brand if flybe were allowed to use it in some form.

As for oneworld, I don't think flybe would fit. BA mainline will still be serving the regions with shuttles to LHR/LGW which feeds the global BA network and numerous oneworld carriers. Flybe's point to point network is impressive from a regional perspective but would neither feed or benefit a global alliance.


User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 13, posted (8 years 1 month 2 weeks 5 days 2 hours ago) and read 5957 times:

Quoting Shamrock_747 (Reply 12):
There would also be risk of diluting the BA brand if flybe were allowed to use it in some form

I am not too sure about that - apart from paying to check-in bags, BA Connect and Flybe are very similar in terms of service. In fact, Flybe offer a better service for business passengers - they have an 'Economy Plus' ticket which is very similar to BA Connect's 'BA Connect Plus' Ticket. Both offer free lounge access, 30k free check-in allowance, miles on FF accounts. However unlike BA, Flybe offer free food and drink...quite surprising!

However, you may have a point if flights are cancelled - Flybe may not be good for the BA brand as they do not rebook on other airlines, even though they have interline agreements with all the major carriers, which is unlike other LCCs.

Quoting Shamrock_747 (Reply 12):
Flybe's point to point network is impressive from a regional perspective but would neither feed or benefit a global alliance.

You have a point there - if BHX or the other regionals were hub airports then it would be a different story. MAN on the other hand could receive a degree of connecting traffic - AA fly in from ORD, BOS, BA flys to JFK and there are loads of other international carriers that could provide traffic - but I suppose the question is whether this fits into the business model?


User currently offlineDavid_itl From United Kingdom, joined Jun 2001, 7442 posts, RR: 13
Reply 14, posted (8 years 1 month 2 weeks 5 days 1 hour ago) and read 5869 times:
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Quoting Shamrock_747 (Reply 12):
BA mainline will still be serving the regions

Shall we tug our forelocks as we do that? It beggers belief that someone still thinks that the regions are being served by geting everyone to route through London.

Quoting Concorde001 (Reply 13):
the question is whether this fits into the business model?

They had the opportunity to establish MAN as a hub (hello nice new terminal built for them!) or to make it their principal low-fare base by challenging easyJet's operations ex-LPL instead of wetting themselves, raising the white flags and scaling back operations. For too long MAN itself "looked after" BA by not reducing charges even more to as get easyJet in. Perhaps they now realise that somewhere along the line, they made a mistake.

From today's MEN focusing primarily on the local MPs reaction but with this tagged on:
'Manchester Airport said in a statement: "British Airways' announcement is a significant change for Manchester Airport, but we believe that this will be a positive development for the Airport and our passengers.

"Flybe will become one of the largest scheduled operations at Manchester Airport.

"Manchester Airport is extremely supportive of Flybe and believe this is a great opportunity to create real growth in regional operations."'

Quoting Shamrock_747 (Reply 12):
would neither feed or benefit a global alliance

Can you remind us of the benefits of being in a global allicance (specifically oneworld) has done for the likes of MAN, GLA & EDI in terms of securing more services operating non-stop through member airlines as opposed to codesharing shuttle services (the tacky way of saying you serve an airport).


User currently offlineShamrock_747 From , joined Dec 1969, posts, RR:
Reply 15, posted (8 years 1 month 2 weeks 5 days ago) and read 5829 times:

Quoting David_itl (Reply 14):
It beggers belief that someone still thinks that the regions are being served by geting everyone to route through London.

BA isn't getting everyone to route through London. Pax can fly non-stop with other carriers on routes that BA don't fly, however the fact is there are shuttles to LHR where connections can be made all over BA's network. Either way, more choice for the passenger.

Quoting David_itl (Reply 14):
Can you remind us of the benefits of being in a global alliance (specifically oneworld) has done for the likes of MAN, GLA & EDI in terms of securing more services operating non-stop through member airlines as opposed to codesharing shuttle services

As far as I'm aware almost none - but that isn't what being part of a global alliance is about. In my opinion a key benefit of an alliance is connections across various airlines with ease. For example JAL are about to join oneworld. Does this mean BA will (re)start non-stop flights from LHR to Nagoya and Osaka? Of course not. However pax will greatly benefit for enhanced co-operation with ticketing, connections and recognition of frequent flyer status.


User currently offlineBAxMAN From St. Helena, joined May 2004, 671 posts, RR: 2
Reply 16, posted (8 years 1 month 2 weeks 5 days ago) and read 5825 times:

Quoting David_itl (Reply 14):

The bitterness in your posts is quite perplexing. It seems that you have convinced yourself that the regions could have been profitable for BA but, from their snobby Southern HQ, decided that manky Northerners who eat their chips with gravy were not worth bothering with.

Don't get me wrong, I'm really disappointed that BA are pulling out of MAN (and elsewhere). I know many BACX people (like some IOM guy who posts here) who are genuinely affected by these changes rather than the 'Boo f'ing hoo, BA doesn't care about north of Watford' Brigade. I expected the pull out at some point, but certainly not by March 2007.

The fact is that yields for O&D ex-MAN/North West have been decimated. A company like BA just cannot compete. BA were beaten hands down by the LCC competition. It cannot exist in these markets just for the sake of prestige or history. If BA could have made MAN/GLA/EDI/SOU/BHX/BRS work, they have done so. If the investment needed to make these places work would have been worth it, they would have invested. BA is a private company chasing profit and doesn't give a damn where that profit lies. As for establishing a hub, that's really the equivalent of me fantasising that Evangeline Lily will knock on my door asking if I can spare any sugar.

In the longterm, BA have done MAN a favour. BE are much more adept at this kind of service and are in a position to make it work. They are not bogged down with pension deficits and the like which BA cannot wash their hands of in a Chapter 11-esque kind of way.

The investment in BE is interesting, though. It wouldn't be beyond the realms of possibility that BE become some sort of BA franchise although I do admit that this is incredibly unlikely, mainly because BE seem to be doing just fine by themselves.



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User currently offlineConcorde001 From United Kingdom, joined Jan 2005, 1230 posts, RR: 3
Reply 17, posted (8 years 1 month 2 weeks 4 days 5 hours ago) and read 5554 times:

Quoting BAxMAN (Reply 16):
The investment in BE is interesting, though. It wouldn't be beyond the realms of possibility that BE become some sort of BA franchise although I do admit that this is incredibly unlikely, mainly because BE seem to be doing just fine by themselves.

Does BA have alot of high yielding Executive Club members in the regions? If so, will these passengers be forced to switch by the sale of flybe - I'm sure BA Connect had some corporate accounts??? Perhaps codesharing could be an idea to stop them switching to LH/AF etc -or is there no point?


User currently offlineBAxMAN From St. Helena, joined May 2004, 671 posts, RR: 2
Reply 18, posted (8 years 1 month 2 weeks 4 days 4 hours ago) and read 5510 times:

Quoting Concorde001 (Reply 17):
Does BA have alot of high yielding Executive Club members in the regions? If so, will these passengers be forced to switch by the sale of flybe - I'm sure BA Connect had some corporate accounts??? Perhaps codesharing could be an idea to stop them switching to LH/AF etc -or is there no point?

ABZ and EDI see a high number of Gold/Silver ECH.

However, I don't think BACX/BACON was particularly instrumental in keeping these passengers with BA. However, BD are definitley going to benefit enormously on their MAN-Scotland runs for the points hungry.



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