UK's Flybe Plans London IPO

November 30, 2010

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British budget airline Flybe plans a London initial public offering (IPO) in December that would value Europe's largest regional carrier at about GBP£240 million (USD$374 million).

Flybe said on Tuesday it would raise GBP£60 million from the sale of new shares, using half of the proceeds to fund the expansion of its fleet and the other half to strengthen its cash position to allow it to pursue other growth opportunities, such as acquisitions.

"A listing will assist Flybe in achieving the next stage in its... strategy for growth," the airline's chief executive Jim French said in a statement.

The offering will represent around 25 percent of the company, a source familiar with the matter said.

Earlier this month the UK's Sunday Times newspaper said Flybe would use the proceeds of a flotation to fund the takeover of Flybaboo, a Swiss regional carrier, and an unidentified Finnish airline.

West England-based Flybe, which posted a pretax profit of GBP£12.8 million on revenues of GBP£572.3 million for the year to March 31, acquired the former regional airline business of British Airways, BA Connect, in 2007.

"They are well positioned in the UK and integrated the BA Connect business well, so you would think their aim would be to try something similar in another European market," said Arbuthnot analyst Gerald Khoo. The carrier's biggest shareholder, with a 69 percent stake, is the trust that looks after the estate of the late Jack Walker, the former steel magnate and owner of Blackburn Rovers Football Club.

British Airways, which owns 15 percent of Flybe, said it planned to subscribe for enough shares in the offer to maintain the size of its holding. The remainder of the company is owned by Flybe employees and its chief executive.

"I would have expected BA to sell up on a float, but they are actually putting cash in. You could speculate they are staying around to help if there's a takeover attempt, but you wouldn't think 15 percent was enough," said Khoo.

The airline, which carried more than 7 million passengers last year, recently struck code-share deals with Air France on some European routes and Finnair on Scandinavian and Baltic Sea co-operation.

Flybe, which focuses on niche UK routes and operates 45 routes between the UK and France, has tried to float several times but has been forced to shelve plans because of tough market conditions.