Flybe Eyes Regional Routes After Raising $250 Million Share Sale

Flybe Group Plc agreed to sell shares in a push to raise 150 million pounds ($250 million) as Europe’s largest regional airline seeks to bolster its balance sheet and add routes.

The placing of about 141.5 million new ordinary shares at 110 pence apiece represents a 7.2 percent discount to yesterday’s closing price of 118.5 pence, the Exeter, England-based airline said. Qualifying investors are being offered two open-offer shares for every three existing ordinary shares held at close of business on Feb. 18.

“This business has real competitive strength and that’s what we’re building on,” Chief Executive Officer Saad Hammad said on a conference call with journalists today. “To really thrive we need more strength and resilience.”

Since joining Flybe in August, the former EasyJet Plc chief commercial officer has sought to restore profitability, scrapping loss-making routes, cutting jobs and closed bases to raise cash. More than 45 percent of the money raised today -- 68 million pounds -- will go toward strengthening the airline’s balance sheet, while about 35 million pounds will be used to expand commercial operations over the next two years, Hammad said.

The carrier has a rolling list of about 100 routes it is considering, with a goal of adding 38 new connections over the next three years, the executive said. Flybe is seeking to “analytically deploy” capital by targeting niche markets that are too small to attract low-cost carriers and too thin to be operated profitably by network airlines, he said. It has no route overlap with Europe’s largest discount airline, Ryanair Holdings Plc.

Fleet Costs

Flybe fell as much as 2.5 percent to 116 pence in London. The stock has more than doubled in value over the past twelve months, valuing the carrier at 87.2 million pounds.

The capital injection, underwritten by Liberum Capital Ltd., will improve operational flexibility and help pad out any disruptions, Flybe said in a statement today. The funds will also be used to cut fleet ownership costs, making it possible for the carrier to own aircraft through secured loans rather than full operating leases. Other targets include upgrading information technology and finance systems within 12 months, as well as improving customer service.

Sales in the third quarter were 142.9 million pounds, close to the level of a year earlier, Flybe said earlier this month. Per seat costs fell 5.2 percent for its U.K. airline operations excluding fuel and restructuring.

The airline has chosen nine new routes to be added this summer after discontinuing as many as 30 connections. The expansion focuses on routes not served by others carriers, like linking Birmingham in central England to Newquay to the southwest and Cologne, Germany.

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