Flybe’s return hanging in the balance

Flybe’s return to the skies is hanging in the balance amid the resignation of a “big swinging” hedge fund manager that was plotting the airline’s revival.

By Oliver Gill 6 March 2021

Lucien Farrell of Cyrus Capital, whose friends include Ben Elliot, the nephew of the Duchess of Cornwall and co-chairman of the Conservative Party, has stepped down as a director of the company Thyme Opco, according to official filings.

Thyme Opco acquired Flybe from administrators EY in October to “restore essential regional connectivity in the UK, and contribute to the recovery of a vital part of the country’s economy”.

Mr Farrell’s decision to stand down last Monday followed a crunch hearing on the previous Friday, February 26, between regulator Civil Aviation Authority (CAA), EY and law firm Freshfields.

The administrators argued that take-off and landing slots worth tens of millions of pounds each should be handed over to Thyme Opco.

An application by Thyme Opco for an operating licence was also lodged at the hearing.

Industry insiders said that the CAA had adjourned the part of the hearing relating to the transfer of the slots having been unable to come to a final decision.

But the operating licence application is expected to be granted in the next two weeks, the sources added.

Mr Farrell’s decision to acquire the Flybe brand, intellectual property, stock and equipment sparked speculation within aviation industry circles over his motives for restarting the perennially loss-making airline.

“Slots. That is all they are doing. Trying to find a way to reclaim and sell them,” one analyst claimed at the time.

Flybe collapsed a year ago with the loss of 2,000 jobs. Cyrus Capital previously owned the carrier alongside Sir Richard Branson’s Virgin Atlantic and what was called Stobart Group, the owner of Southend Airport.

The three investors were unable to convince the Government to plug a £100m hole in Flybe’s finances and were unwilling to invest more of their own capital with the spectre of coronavirus looming.

Flybe had up to 12 pairs of take off and landing slots at Heathrow airport. In the past, the sought-after slots have traded for high prices. Air New Zealand sold one slot pair at Heathrow for $27m (£20m) in March 2020, for instance.

The ownership of the slots has been complicated by the pandemic.

When airlines collapse, the administrators would sell them to another airline. If the administrators were unable to sell them, strict rules dictate that they would be handed back to a central slots coordinator.

However, the rules have been suspended during the crisis leaving the ownership of Flybe’s slots in limbo.

Mr Farrell’s resignation leaves Thyme Opco and associated companies with just one director, Jon Peachey, the chief executive of Virgin Group’s American operations between 2008 and 2013.

Mr Farrell, 46, often targets companies facing bankruptcy. One executive once described him as a “big swinging, high-rolling kind of guy. He has got a sort of free wheelin’ style that some investors value.”