Flybe Group PLC FLYBE update on Aircraft Purchase (1604E)
14 July 2016 - 4:00PM
UK Regulatory
TIDMFLYB
RNS Number : 1604E
Flybe Group PLC
14 July 2016
14 July 2016
Flybe Group plc
("Flybe" or "the Company")
FLYBE update on Aircraft Purchase
As announced on 9 June 2016, Flybe entered into a contract with
Nordic Aviation Capital (NAC), to cancel obligations to lease nine
used Bombardier Q400 turboprop aircraft, while taking full
ownership of ten Q400 aircraft it was already under contract to
lease. The NAC contract had two conditions precedent that were
unsatisfied at the time of this initial announcement, related to
the previous agreements reached with Republic and Embraer which
were announced to the market on 14 September 2014. Those conditions
have now been fulfilled.
Since Republic went into Chapter 11 proceedings in February this
year, it was necessary to get agreement and/or comfort from both
Embraer and Republic that the NAC contract would not adversely
affect the 2014 tri-partite arrangements in relation to the
previous E175 obligation. The Embraer and Republic commitments have
now been affirmed by the execution of documents and those
conditions precedents have been satisfied for the NAC
transaction.
The objective of the NAC Agreement was to continue our stated
strategy of reducing Flybe's aircraft capacity and cash outlay. The
deal consists of a number of elements:
1. NAC agreed to relieve Flybe of the obligation to take
operating leases on nine aircraft from Republic. Based upon the
scheduled delivery dates for those aircraft and at the foreign
exchange rate at 31 March 2016, this saved Flybe from a total of
GBP38m lease liabilities over the next 6 years.
2. In return, Flybe committed to take equity ownership of 10
ex-Republic aircraft already committed to be leased. This will
require GBP86m of cash (31.3.2016 exchange rates), reducing to
GBP26m after the loan financing. It, however, replaces GBP49m in
committed lease payments over 5 years on these 10 aircraft (based
upon the same exchange rates). It also avoids end of lease
restitution liabilities estimated at cGBP5m. In addition, the
purchased aircraft have an expected residual value of GBP16m.
3. Flybe is still committed to leasing the remaining 5 ex-Republic aircraft from NAC.
The aircraft will be financed at c70% of Loan To Value post
purchase on an individual basis through an arrangement with Nord
LB. Flybe did not hedge the USD amounts related to the aircraft
purchases. At current exchange rates, the Sterling value of the NAC
deal increases by c10%. The projected savings will remain the same,
i.e. GBP4m in year and GBP8m/annum thereafter.
Saad Hammad, Flybe CEO said:
"This reordering of contractual arrangements moderates our seat
capacity growth and continues Flybe's strategy of rebalancing its
fleet structure towards a more even split between ownership and
operating leases. It also reduces our total full life financial
liabilities on our aircraft fleet. This transaction together with
the earlier 3 aircraft equity investment announced in April 2016,
reduces the proportion of aircraft on operating leases in our UK
fleet from 80% to 66% by 31 March 2017."
Enquiries:
Flybe Tel: +44 (0)20 7379
Philip de Klerk, 5151
Chief Financial
Officer
Maitland Tel: +44 (0)20 7379
Neil Bennett 5151
Andy Donald
This information is provided by RNS
The company news service from the London Stock Exchange
END
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