Ruthless credit card firms starved Flybe of £50m: Revelation comes as airline closes in on £2m rescue deal
Credit card companies are holding back more than £50million of customer payments from troubled airline Flybe, industry sources have told the Daily Mail.
Flybe bosses claim being deprived of card payments was the key factor that pushed it to the brink of insolvency.
The Mail can now reveal the full extent of that cash crunch that has forced Flybe to accept a controversial cut-price takeover by Connect Airways, a consortium of Virgin Atlantic, Southend airport owner Stobart and investment house Cyrus.
Flybe bosses claim being deprived of card payments was the key factor that pushed it to the brink of insolvency
The complex transaction, valuing the budget airline at just 1p a share, is fiercely opposed by Flybe’s leading investor, hedge fund group Hosking Partners.
But the company insists it is the only option. Sources told the Mail that the firms taking credit card payments from passengers were at one point refusing to pass on any money at all to Flybe.
Instead they were withholding payments in case the airline went under. If that had happened, it could have forced credit card providers to issue refunds to passengers who paid on plastic.
Christine Ourmieres-Widener, the French chief executive of Flybe, declined to comment on the £50million figure but said the squeeze on card payments starved her airline of working capital.
‘The credit card companies were putting on more pressure. They knew that the outcome could be quite challenging if not brutal,’ she said.
The processing companies involved, which have now eased their stance on handing over payments, have not been named but AIB Merchant Services is understood to be one of them.
An industry in crisis
- Aug 2017 Air Berlin files for insolvency after years of losses
- Oct 2017 Monarch Airlines collapses into administration
- Feb 2018 Norwegian plunges to annual loss of £27million due to rising costs
- Oct 2018 Primera Air collapses after failing to secure financing. Flybe profit warning
- Jan 2019 Ryanair issues its second profit warning in four months. Flybe seals rescue deal
- Feb 5, 2019 Germania files for bankruptcy
- Feb 7, 2019 Norwegian reveals annual losses of £270million
- Feb 16, 2019 Regional airline Flybmi collapses into administration
Allied Irish Banks said it is a minority shareholder in AIB Merchant Services, which it described as a separate legal entity.
The majority investor in AIB Merchant Services is US company First Data Corporation.
Ourmieres-Widener, 54, pictured, also revealed that at one stage in mid-January, Flybe was so close to going under that a receiver from accountancy firm EY was in the room with directors. ‘We were in a very dramatic situation,’ she said.
She and chairman Simon Laffin claim the current deal with Connect is the only viable solution for Flybe, though this is disputed by Hosking which believes the company could have got a better price.
A sale of the operating company that runs the airline is scheduled to go through on Friday.
This does not need the approval of shareholders, because Flybe last year changed its stock market listing so it could sell assets without consulting investors. Shareholders do, however, have a vote on the sale of the parent company on March 4, though this is just a shell containing some cash and debts.
Ourmieres-Widener said that if there is a vote against, ‘it is likely the board would suggest liquidation of the shell company,’ and investors would lose everything. ‘I understand shareholders are disappointed but we are still flying and 1p a share is better than nothing.’
She said the deal with Connect will protect 2,400 jobs along with the 1,400 members of its pension fund. The latter do not qualify for safeguards under the UK Pension Protection Fund, because the scheme is registered in the Isle of Man. Connect has agreed to take responsibility for the fund and make up contributions.
Ourmieres-Widener said the collapse at the weekend of similarly named airline Flybmi had led to confusion but had no effect on bookings. She added that she had sent a message of support to its boss, Peter Simpson. ‘I’m sure he was heartbroken at the decision he had to take.’
Flybe is interested in hiring Flybmi’s ‘very good pilots and engineers’. Ourmieres-Widener said: ‘Flybe is vital for infrastructure of the UK. We have 130,000 passengers a week, 75 aircraft.
‘We run the only flight Glasgow to Southampton and we are opening a route from Heathrow to Newquay,’