Exeter-based airline Flybe (LON:FLYB) is set to go bust ‘within hours’, after failing to secure additional, emergency financial support to keep the company afloat.
Slow violin music for Flybye
This comes amid a period of widespread hardship for the aviation and travel industries, with both Easyjet (LON:EZJ) and British Airways (LON:IAG) feeling the full force of the Coronavirus crunch, over the last week.
After avoiding administration in January – courtesy of £100 million from the British taxpayer and changes to Air Duty Tax – the company and its 2,000 employees look set to be in real trouble on Wednesday evening.
The imminent crash is being blamed on the impact Coronavirus has had on demand for air travel. It will come as a real kick in the teeth to British PM Boris Johnson, who bailed the company out as part of his initiative to keep the UK well-connected (at present, Flybe accounts for 40% of all domestic flights).
After running into difficulties last year, the company was bought by a consortium containing Virgin Atlantic, who said they would pump £30 million into the business in January.
Responding to the pressures of the Coronavirus outbreak earlier in the week, the company’s Chief Executive told the BBC they would be accepting a 20% pay cut, freeze recruitment and offer staff ‘unpaid leave’.
Virgin added that Flybe bookings were 40% lower than this time last year.
Trying to ignore IMF pessimism
Elsewhere on Wednesday, equities and national indexes were keen to hush the pessimistic GDP forecasts of the IMF, who joined the G7, WHO and central banks in revising their expectations in light of Coronavirus.
Despite coming down off of their intraday highs, Wednesday still proved a positive day for markets, and a far-sight from the blood bath witnessed at the end of February. Somehow, most equities managed to cling on, to whatever contrived optimism was on offer.
Speaking on the IMF’s statement and the Wednesday session outside of Flybe, Spreadex Financial Analyst Connor Campbell stated,
“The Washington-based institution became the latest body to slash GDP forecasts, stating that ‘global growth in 2020 will dip below last year’s levels’. For reference, the IMF was previously expecting worldwide growth of 3.3% against 2019’s 2.9%.”
“It refused, however, to be drawn into exact forecasts, not only for the globe, but for China. Talking of the superpower, the IMF would only say that previous growth estimates are ‘no longer valid’.”
“This dose of reality – which came alongside a jump in UK coronavirus cases from 51 to 85 – undid some of the goodwill generated by the World Bank’s $12 billion stimulus pledge, taking the Western indices from their highs.”
“Nevertheless they remained strongly up on the day, the European gains firmed up by a 500 points surge from the Dow Jones. Though that sounds like a big movement, in the context of the last few sessions that doesn’t even recoup the ground lost by the Dow following the Fed’ impromptu rate cut. It was, however, better than the alternative.”
“The FTSE rose 1.1% to 6780, leaving it 80 points shy of the day’s peak, while the DAX and CAC climbed 160 points and 65 points respectively.”