Flybe Group Plc has begun takeover discussions with several parties as the rising cost of oil crimps earnings at Britain’s biggest provider of domestic flights and the company faces increasing financial stress.
The Exeter, England-based carrier is in talks with “a number of strategic operators about a potential sale,” it said in a statement Wednesday, without naming them. The stock rose the most since 2013.
Airports operator Stobart Group Ltd. dropped plans for a purchase of Flybe in March after failing to agree on terms. Sky News reported earlier that Stobart may have renewed its approach and that turnaround funds may also be interested, citing bankers it didn’t identify.
The carrier said there’s no certainty that a bid will be forthcoming. In the meantime, it will carry on with plans to shrink its fleet and move to cheaper turboprop planes in a effort to strengthen its balance sheet and preserve cash.
Flybe said it faces the prospect of companies that process bank-card transactions lifting the required level of collateral. If the group was unable to access sufficient additional liquidity, that could cast significant doubt on its ability to continue as a going concern.
Flybe focuses on cities largely ignored by network and low-cost operators, ranking as Europe’s biggest airline using planes with 100 seats or less. While a valuable market, the smaller aircraft generate lower operating margins, leaving the company particularly vulnerable to fluctuations in costs and demand.
The stock rose as much as 41 percent and was trading 18 percent higher as of 8:22 a.m. in London. It dropped 41 percent on Oct. 17, the most since Flybe floated in 2010, after the company said softer second-half sales would lead full-year profit to miss analyst estimates.
The shares are trading down 56 percent this year, valuing the company at £29 million ($38 million.)
Other carriers have already succumbed to oil’s rise. Belgium’s VLM announced its liquidation in August, when Switzerland’s Skywork Airlines AG also ceased flights. The German arm of Small Planet filed for insolvency in September, with Azur Air halting operations in the country, and Nordic leisure carrier Primera Air collapsed on Oct. 1.
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