Flybe Hits Out As BA Writes Down Stake
Privately-owned UK airline Flybe has hit back at British Airways after the 15 percent shareholder wrote down the value of its stake in the low-cost carrier by around 25 percent.
Flybe said Wednesday it disagreed with the decision, arguing that its regional airport business model was robust and it would make a pretax profit for the year to March 2010.
"Flybe notes with surprise that British Airways have chosen to impair the value... Flybe believes that the decision is principally based on BA's view of their own performance and prospects rather than an analytical view of Flybe's track record and future prospects," it said.
British Airways said in its results last week it has written off around 25 percent of the value of its stake in Flybe after reviewing the carrier's prospects.
BA, which posted record losses for 2009/10, said it had cut GBP13 million pounds (USD$20.84 million) from the value of the 15 percent investment, acquired as part of the sale of its regional arm BA Connect to Flybe in 2006.
BA now values the stake at GBP30 million, implying a full value for Flybe of GBP200 million.
"Despite a growth in Flybe's revenue and an expected reporting of profits for the year ended March 31, 2009, the review (of the investment) showed a further decline in fair value, associated with a lower rate of forecast revenue and earnings growth than previously expected," the carrier said in a statement.
Flybe said it was forecasting a profit for 2009/10 and had cash reserves of GBP57 million. It added that share prices of low cost carriers Ryanair and easyJet had risen despite the downturn.
"Flybe places on record that it and its advisors disagree with BA's decision to impair its shareholding in Flybe," it said.
British Airways CEO Willie Walsh said last week that the outlook for airlines generally was very weak, while reporting record full-year losses of GBP401 million.
A BA spokeswoman said the original forecasts for Flybe had been made in March 2007, before the economic downturn took a scythe to airline passenger numbers across the world.
Flybe specializes in regional flights around the UK and Europe, serving airports such as Exeter and Southampton.
