Finnair plans revised regional operations after Flybe’s JV exit

Finnair is mapping alternatives to continue Flybe Finland's regional flying with a cost-effective business model and new ownership structure for Flybe Nordic, following the decision by Flybe to exit the joint venture and sell the shares that it holds in Flybe Nordic to a potential new majority shareholder or to Finnair for the price of €1.

Flybe Nordic fully owns Flybe Finland, which is in charge of Finnair’s regional airline operations. Finnair and Flybe began their cooperation in 2011 when they founded Flybe Nordic with Flybe owning 60% and Finnair 40%.

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 in the meantime.

“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 co-operation. 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,” explained 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.

Finnair’s balance sheet includes a €9.9 million subordinated loan issued to Flybe Finland in 2011. Finnair has written down the value of its Flybe Nordic shares following the realised losses of Flybe Finland.

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