Flybe planning an IPO in London in 2010?

Merrill Lynch, the airline's long-standing adviser, has reportedly been instructed to prepare for a listing in 2010, which is likely to be held after the airline's current full year financial results are published.

While the carrier has not confirmed the plan, it has refused to rule out the possibility of the IPO, with a spokesman stating, "Flybe's business is delivering a robust performance against the backdrop of difficult industry conditions. The directors of Flybe are very pleased with these results and with the numerous growth opportunities which the business has options to action".

The spokesman added that the carrier, "may consider the possibility of a public listing at some point in the future when the demand for IPOs returns and provided an IPO could be undertaken in the best interests of the company, its shareholders and customers."

Among the beneficiaries of the IPO would be the family trust of Jack Walker (the late Blackburn Rovers Football Club owner), which controls 69% of the business. Chairman and CEO, Jim French (7% share holding), the airline's staff (9%) and British Airways (15%, acquired when BA Connect was sold to Flybe in 2006) will also benefit from the potential move.

The company has been planning to conduct an IPO since 2005 but two previous attempts were shelved. The most recent, in 2008, was halted because of the global financial crisis.

Maintains position as UK's largest domestic carrier

The carrier now believes substantial value has been added since the takeover of BA Connect.

According to OAG data, Flybe currently has a 28.3% capacity share of domestic UK services, making it the largest domestic carrier by capacity.

UK domestic capacity breakdown by carrier (seats per week* as % of total): Nov-2009

Source: Centre for Asia Pacific Aviation & OAG

The carrier operates 180 routes between 55 European airports.

Flybe destination map: Nov-2009

Source: Flybe

Flybe expects "significant" FY2009/2010 profit, but lower than expectations

Flybe previously stated it expects to report a profit for the 12 months ended 31-Mar-2009, although the profit is expected to be lower than originally forecast.

However, CEO and Chairman, Jim French, added that the LCC is still expecting "a significant profit" for FY2009/10, as it expects "more carnage this Winter" in the airline industry.

Mr French, attributed the expected profits to the carrier's "resilient business model", which has provided it with flexibility to adjust capacity when required.

Flybe one of many carriers planning IPOs

In recent months, a number of carriers, both LCCs and network carriers, have expressed their intention to launch IPOs in the next few years, despite the challenges presented by the current market and financial conditions. Some of these companies are small, young carriers, seeking to raise capital to expand, while others are larger privately or Government-owned companies looking to become publicly traded.

LCCs planning IPOs

Airline	Planned IPOs	Further Details
AirAsia (Malaysia, Indonesia, Thailand)	2011/2011	CEO, Tony Fernandes, in Nov-2009, confirmed the carrier is looking to list Thai AirAsia on the Stock Exchange of Thailand (SET) sometime in 2010 or 2011. The group also plans to list AirAsia in the country, but is yet to determine timing for the listing. The carrier also plans to list Indonesia AirAsia on the Jakarta Stock Exchange at a later date.
Flybe	2010	Reportedly planning an IPO in London in 2010
Flydubai (UAE)	n/a	flydubai CEO, Ghaith Al Ghaith this month refused to comment on the possibility of an IPO for the carrier, stating if such a plan is to go ahead, the decision will be made by the Dubai Government.
JuneYao Airlines (China)	2010	Progressing with plans to launch an IPO, with the capital raised to be used to expand the airline's fleet. JuneYao Group in Jun-2008 confirmed it planned to list its aviation unit, including JuneYao Airlines, in 2010.
Pegasus Airlines (Turkey)	2H2010	To conduct a 25-30% IPO on the Istanbul Stock Exchange
Cimber Sterling (Denmark)	Nov-2009	Received subscription orders for all 27.5 million new shares in its IPO offering on the Copenhagen stock exchange. The offering closed on 27-Nov-2009 after the company exercises an over-allotment option. The carrier received orders for the minimum amount (USD56-67 million).
StarFlyer (Japan)	In 2010	IPO to be conducted in 2010, with an internal committee now established to prepare for the listing.
Tiger Airways (Singapore)	2010	Tiger Airways (based on reports from Nov-2009) is considering launching an IPO of at least USD500 million, or 20% of its share capital, in 2010, to fund expansion plans in Australia and purchase new aircraft.

Source: Centre for Asia Pacific Aviation & airline reports

Network airlines planning IPOs

Airline	Planned IPOs	Further Details
Air India (India)	2011 or 2012	India's Minister for Civil Aviation, Praful Patel, in Jun-2009 stated an IPO of Air India would be considered in the "near future", depending on the state of equity markets.
Garuda Indonesia (Indonesia)	1H2010	Garuda, in Nov-2009, confirmed plans to launch an IPO on 40% of its equity in 1H2010, and is currently preparing for the launch. The decision is in line with Indonesian parliamentary approval from 2008
Kuwait National Airways (Kuwait)	2009	In late Jun-2009, the Kuwaiti Government confirmed plans to fully privatise the loss-making national carrier by the end of the year.
Porter Airlines (Canada)	-	The airline, in Aug-2009, stated it was considering an IPO, with funds to enable the carrier to finance orders for new aircraft. No timeframe or further details were disclosed.
Qatar Airways (Qatar)	2012-2014	Intends to become wholly government owned by the end of 2009 or early 2010, clearing the way for a full privatisation of the carrier, with a target date between 2012 and 2014.
Saudi Arabian Airlines (Saudi Arabia)	3Q2010	Saudi Arabian Airlines Director General, Khalid Almolhem, in Oct-2009, announced plans to conduct an initial public offering (IPO) of 30% of its catering unit in 3Q2010, with Calyon appointed as advisor. 49% of the catering unit was already privatised in Jan-2008. The carrier also announced plans to merge its ground handling unit with the UK's National Handling Services and Attar Travel Company Ltd by the end of 2009 or early 2010. The carrier's maintenance unit will also be privatised in 4Q2010.

Source: Centre for Asia Pacific Aviation & airline reports

Background Information:

• Flybe commenced operations in 1979, rebranding to Flybe in 2002;
• The largest scheduled airline at Birmingham, Exeter, Norwich, Southampton, the Channel Islands, Cardiff and Belfast City;
• Route network comprises 73% domestic UK, 20% European city routes and 7% European leisure destinations;
• Handled 7.5 million passengers in 2008;
• Since 2002, Flybe has reported passenger growth of 24% compound p/a, ancillary revenue growth of 63% compound p/a and turnover growth of 25% compound p/a;
• Has committed to over USD1.9 billion of firm aircraft orders (60 Bombardier Q400s and 16 Embraer 195s), which will be delivered by the end of 2009;
• Operates a fleet of 77 aircraft.