By Callum Keown
Britain’s largest domestic airline Flybe collapsed into administration on Thursday as the coronavirus outbreak tipped the struggling carrier over the edge.
The company said all flights had been grounded and urged customers not to travel to the airport, confirming it had entered administration.
Europe’s largest regional carrier held 11th-hour talks with the U.K. government but failed to secure a £100 million loan, according to reports.
It comes less than two months after the troubled regional airline agreed a rescue plan with the government, which included working on a repayment plan for its tax debt.
“Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business,” Flybe said in a statement.
“This has been compounded by the outbreak of coronavirus which in the last few days has resulted in a significant impact on demand.”
The virus outbreak, which began in Wuhan, China, has hit airlines around the world over the past six weeks. Major airlines, such as British Airways /zigman2/quotes/208070069/delayed UK:IAG +3.06% , Lufthansa /zigman2/quotes/201210530/delayed XE:LHA +1.78% , United Airlines /zigman2/quotes/205037281/composite UAL +1.56% and Cathay Pacific /zigman2/quotes/203532437/delayed HK:293 -2.44% have been forced to cancel flights to and from mainland China.
Airline stocks have nosedived as companies warn of the epidemic’s impact on bookings and profit. In recent weeks the virus has spread to Europe, and in particular Italy, which has hit demand for European-focused airlines. Flybe said the drop in demand had now filtered through to the U.K.
Markets.com analyst Neil Wilson said Flybe had been struggling for months and even years before the coronavirus outbreak.
“COVID-19 was the nail in the coffin. The coronavirus is destroying travel demand — it will accelerate the process of failure and consolidation in the European airline sector,” he said.
Connect Airways — a British consortium of Virgin Atlantic, Stobart and Cyrus Capital — was founded in December 2018 to buy Flybe. It was given merger control by the European Commission in July in a deal it said would “secure the long-term future” of the airline. The consortium has invested more than £135 million in Flybe over the past 14 months.
The Exeter-based airline had put itself up for sale in November 2018, just weeks after issuing a profit warning over poor demand, a weaker pound and higher fuel costs.
In a statement on Thursday, Stobart Group said: “Flybe had shown promising signs of a turnaround despite the delay to receiving merger control clearance from the European Commission for its acquisition. However, despite the best efforts of all, not least the Flybe people, the impact of COVID-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.”
Jeremy Thomson-Cook, chief economist at Equals, formerly FairFX, said: “The coronavirus has proved to be the straw that broke the camel’s back for Flybe and highlights that British businesses, especially those that predominantly serve nonmetropolitan parts of the U.K., will find an environment of lower consumer demand difficult to weather.”