How 150 consultants from EY-Parthenon helped save Flybe
Along with the wider aviation industry, airline Flybe ran into major turbulence during the first year of the pandemic, and looked set to drop out of the sky when it appointed administrators in 2020. However, the team of experts from EY-Parthenon would go on to ensure the company survived by stabilising the firm, and quickly enabling a sale.
The global aviation industry has been enduring one of the most difficult periods in its history in recent years. The number of airlines to have collapsed was already at its highest level since 2012, when the disappearance of international travel amid a protracted global health crisis pushed even more firms to the brink.
This proved to be the case of UK firm Flybe, which operated about 75 aircraft and served more than 80 airports across Britain and Europe, but had been struggling with a decline in bookings for some time. In early 2019, the firm had already entered discussions with several parties about a possible sale, engaging a team from EY-Parthenon to carry out contingency planning in case the company had to be put into administration. On that occasion, a sale was agreed to a consortium consisting of Virgin Atlantic, Stobart Aviation and DLP Holdings. With the threat of administration over, the team withdrew.
One year later, however, Flybe was in trouble again. The Covid-19 pandemic had started to affect the business and flight bookings were falling. With rising fuel costs, currency volatility, market uncertainty and Air Passenger Duty liabilities also weighing the company down, it had been talking to the Government and shareholders consortium about a £100 million loan, but talks stalled amid the deepening coronavirus crisis. This time, Flybe had no choice but to file for administration in March 2020.
Flybe was Europe’s largest regional airline, responsible for more than one-third of domestic flights in the UK – and its possible disappearance represented major damage for many local economies as a result. EY-Parthenon experts Alan Hudson, Joanne Robinson, Lucy Winterborne and Simon Edel were named as joint administrators to try and bring the firm back from the brink; but from the beginning, they were conscious that no UK airline had ever been rescued from an insolvency.
Work started right away, with the EY-Parthenon and Flybe leadership teams agreeing to ground the firm’s fleet of aircraft so that, in the early hours of the next morning, the administration could be affected. After EY-Parthenon quickly formulated an operational plan, they dispatched members of EY-Parthenon staff to 26 airports across the UK and Europe to help brief Flybe’s 2,200 employees, and communicate to over 20,000 passengers that their flights had been cancelled.
Another key priority was to negotiate with the Civil Aviation Authority (CAA) about Flybe’s operating licence and air operator certification, as should it lose these, Flybe would be unable to access the assets and vital permissions it required to function, including UK and EU airport slots. Finally, the EY-Parthenon team had to contact all of Flybe’s aircraft lessors, that is the companies from whom they leased their aircraft and engines. Once these immediate concerns were addressed, though, with Flybe’s status stabilised, the EY-Parthenon team could start planning a sale out of administration.
Sale process
“Within 48 hours of starting, we had contacted over 70 airlines across the globe,” Mike Parr recalled on the EY-Parthenon website. “That got us sufficient interest to keep the airline alive in a challenging market, where consumers were adapting to staying at home and not flying.”
The acquisition process attracted nine credible expressions of interest, ultimately leading to the successful sale of Flybe to a investors who formed a new company, called Flybe. After the initial downfall of Flybe had led to some 2,000 job losses, this provided the possibility for growth, new jobs and the chance for Flybe Ltd to be a valuable economic contributor to regional communities across the UK and EU.
Having achieved a first in UK administrations, and preserved the future of an ailing airline, EY-Parthenon’s work is still not done, however. EY-Parthenon’s engagement with Flybe is ongoing, and has so far involved more than 150 people from seven different sub-service lines. According to Parr, a large, multi-disciplinary team like this is necessary to manage the “phenomenal” number of stakeholders required to keep an airline alive.
“It starts with the employees and creditors, but there were also the regulators, or CAA, other governmental departments, airport slot coordinators, and suppliers,” Parr added. “Being able to manage that and keep all these moving parts aligned and in sync was difficult, but what we achieved has ultimately facilitated the rescue of an airline, which stands to make an important contribution to local economies and the air travel sector as each rebuild after the end of the pandemic.”
Aviation as a whole is far from out of the woods yet. The revenues of the global airline industry will reach $235 billion by the end of 2021. Having been decimated by the Covid-19 lockdown, this shows the industry still has a long way to go to bounce back. Its income remains a whopping 65% lower than its pre-pandemic total revenue from 2019, of $666 billion. However, thanks to the work of the last 18 months, EY-Parthenon’s team are sure they have provided Flybe the best possible chance to thrive in this challenging environment.
Commenting on her LinkedIn profile, Lucy Winterborne concluded, “I’m proud of what our EY-Parthenon team achieved alongside the company and its stakeholders and specialists from across our global firm in relation to the administration of Flybe. Through collaboration and teaming, we managed to quickly stabilise the business and create conditions that made the sale of the business possible.”
