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Flybe to raise £155m through share issue

FLYBE has targeted expanding its routes around the UK as it unveiled a £155 million fund-raising drive - in spite of closing bases in Inverness and Aberdeen.

more EFFICIENCY: Chief executive Saad Hammad said Flybe will still fly to the two bases. Picture: Colin Mearns
more EFFICIENCY: Chief executive Saad Hammad said Flybe will still fly to the two bases. Picture: Colin Mearns

The regional air carrier said investors have signalled their confidence in its management team, its turnaround plan and its expansion strategy by committing £100.5m in a firm placing of new ordinary shares.

It hopes to raise £55.1m in a further placing and open offer, with the full share issue underwritten by Liberum Capital.

Flybe, in the process of axing 450 staff under an ongoing turnaround plan, intends to use the funds to add routes and bases to its network.

Chief executive Saad Hammad revealed it was evaluating as many as 100 potential new routes but declined to specify locations.

It also aims to reduce fleet costs by owning more of its aircraft and redeploying jets, with the fleet focusing on its core of turbo props.

Mr Hammad said 10 jets will be grounded in March and sub-leased or redeployed as the company expands the white label flying operations it carries out for European flag carriers such as Finnair and Brussels Airlines. Early exits will be sought on leases for jets it is unable to sub-lease or redeploy.

While the carrier will no longer have aircraft or crew based in Aberdeen or Inverness once those bases close in March - and in spite of making 133 redundancies between those airports and Glasgow and Edinburgh - Flybe insisted it was committed to serving Scotland.

Mr Hammad said: "We are a regional airline - we want to be the airline on your doorstep. The fact we have closed a couple of Scottish bases does not in any way, shape or form diminish our commitment to serve the Scottish market.

"We need to find a way to more economically, more efficiently serve that market.

"We'll still be flying to Inverness, we'll still be flying in and out of Aberdeen. It's just we're not basing aircraft or crew at these airports."

Mr Hammad would not be drawn on its specific plans for Scotland, beyond noting all routes and frequencies will be continually monitored to ensure "we have an attractive timetable for our customers".

He said: "If anything we are now moving into a real growth footing. Now of course if there are routes [not performing] we will optimise, not just for Scotland but any part of our network. We will have to react.But right now the intention is to drive [a] profitable growth agenda. That's the beauty of this capital arrangement.

"It gives us the firepower to take this business forward in a sustainable and hopefully compelling way from a customer standpoint."

Loganair, which operates 20 Scottish routes under a franchise deal with Flybe, including connections to the Highlands and Islands, declined to comment on how the share offer would affect its business.

Mr Hammad said the actions taken by the firm under his leadership have tackled a previously "unsustainable" cost base and will help it reach the "industry curve" on unit costs.

He said: "With the actions we have announced, the transformation programme, the restructuring already underway and on top of that the additional actions taken in November, we are going to be heading down on that industry curve. We are never going be as low as Ryanair or Easyjet - they have a different sector length, a different model - but they are on that industry curve themselves and we want to be, for our sector length, on the industry curve."

The chief executive declined to comment on speculation business magnate George Soros had increased its stake in the firm, but confidently declared Flybe will have a "blue chip set of shareholders" when the share offer concludes.

Meanwhile, asked how a yes vote in September's independence referendum would affect the aviation industry, Mr Hammad said: "I'm not sure Scottish independence will affect travel behaviours of our passengers in Scotland, and the desire of others from other parts of the United Kingdom to visit Scotland. That's my kind of personal perspective.

"Therefore, the role that we play still stays very, very important either way - whether Scottish people vote for independence or stay part of the United Kingdom."

Flybe shares closed up 2.5p at 121p.

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