Wednesday 19 December 2018 9:18 am

Virgin still weighing its options for Flybe takeover as budget airline shares soar

Reporter at City A.M. covering banking, markets and insurance

Reporter at City A.M. covering banking, markets and insurance

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Shares in struggling low cost airline Flybe have taken off this morning after Virgin Atlantic said it was still considering a potential takeover bid.

Sir Richard Branson’s airline opened talks to buy the company last month after the Exeter-based airline puts itself up for sale.

Virgin confirmed this morning that it was still “reviewing its options” and could make an offer as discussions with Flybe continued.

Flybe shares have soared 15 per cent this morning and have doubled since reaching lows of 9p prior to Virgin’s interest.

Flybe started looking for a sale last month after profits dropped 54 per cent in the six months to the end of September.

Higher fuel prices, weaker sterling and a drop in customer demand affected the airline, while it has committed to leasing Embraer jets between July and December next year, costing it $114m (£88.5m).

Flybe has since launched a new strategy to use existing assets to generate cash and strengthen its working capital.

It has raised £5m from the sale and leaseback of a hangar facility at Exeter and Devon Airport and a further $5m secured against a Bombardier aircraft.

The takeover could appeal to Branson’s company as an opportunity to boost passengers on its long-haul network and also access take-off and landing slots at Heathrow Airport reserved for domestic flights.

It comes four years after the transatlantic airline announced the closure of its domestic flight subsidiary Little Red.