Finnair and Flybe have entered into a conditional share sale agreement of Flybe Nordic - flights will continue normally
Finnair Plc Stock Exchange Release 12 November 2014 at 9.00 am EET
Flybe and Finnair have agreed to restructure the ownership of their jointly owned Flybe Nordic venture, and Flybe has agreed to sell the shares that it holds in Flybe Nordic to a potential new majority shareholder or to Finnair for the price of one euro. The sale of the shares is conditional only upon approval being received from the competition authorities.
Flybe Nordic owns fully the Finnish subsidiary Flybe Finland, which is in charge of Finnair’s regional airline operations. Consequently, Finnair is now mapping alternatives to continue Flybe Finland's regional flying with a cost-effective business model and new ownership structure for Flybe Nordic. These alternatives include a potential new majority shareholder for Flybe Nordic.
Finnair and Flybe began their cooperation in 2011 when they founded the Flybe Nordic joint venture, of which Flybe owns 60 per cent and Finnair 40 per cent.
The companies have already for some time discussed the restructuring and cost saving strategy for Flybe Finland. The companies have not been able to arrive at a common understanding to resolve profitability issues. Flybe and Finnair accordingly have signed an agreement under which it is intended that Flybe will exit Flybe Nordic by the end of 2014, subject to approval being received from competition authorities.
The operations and flights of Flybe Finland will continue normally.
“The financial performance of our joint venture has not developed according to the expectations of its shareholders. We haven’t been able to arrive at a common view to resolve the profitability issues, and therefore the companies have agreed to discontinue the cooperation. Finnair aims to find a new majority shareholder and a business model that would enable the development of regional flying in a financially sustainable way,” says Pekka Vauramo, Finnair CEO.
Flybe Finland currently operates to a number of domestic and European destinations from Helsinki on behalf of Finnair on a contract-flying basis. In addition, Flybe Finland operates to five domestic destinations as well as Tartu, Estonia and Norrköping, Sweden at its own commercial risk.
Flybe Finland started operating code share flights in August 2011 with ATR 72 aircraft and two Embraer 170s. On 28 October 2012, the cooperation was expanded to cover European flights with Embraer 190 aircraft as contracted flying, after which Flybe Finland has operated a third of Finnair’s European traffic.
Finnair’s balance sheet includes a 9.9 million euro subordinated loan issued to Flybe Finland in 2011. Finnair has written down the value of its Flybe Nordic AB shares following the realized losses of Flybe Finland.
Finnair also has advance payment and other operational receivables from Flybe Finland. Due to Flybe Finland’s ownership change and the need to restructure its operations, it is possible that a part of these receivables cannot be collected. Finnair is also considering giving working capital financing to Flybe Finland. Finnair estimates that the resulting financial impacts will not exceed -20 million euros. The exact overall impact will be communicated when the ownership structure is defined.
The Board of Directors
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