Exeter airline hits back over value claims

FLYBE has hit back at British  Airways in a spat over the  Exeter  airline’s value and future prospects.

BA acquired a 15 per cent  stake in privately-owned Flybe as part of the deal which  saw Flybe take over its regional arm, BA Connect, in  2007.

But the flag carrier has  sparked controversy by stating that its holding in Flybe is  now worth around 25 per cent  less than previously reckoned.

BA revised the value of its  stake downwards by £13m to  £30m — implying a full value  for Flybe of £200m. It followed  a £6m write down in BA’s  shareholding the previous  year.

The declaration sparked a  rebuttal from Flybe, which  defended its business model  and claimed the company was  undervalued.

BA, which last week posted  record losses, said: “The  group performed a review of  its investment in Flybe at  March 31, 2009. Despite a  growth in Flybe’s revenue  and an expected reporting of  profits for the year ended  March 31, 2009, the review  showed a further decline in  fair value, associated with a  lower rate of forecast revenue  and earnings growth than  previously expected.

“Accordingly, the group  recognised a £13m impairment of the investment. The  investment is now valued at  £30m.”

A spokesman for Flybe  said: “Flybe notes with surprise that British Airways  has chosen to impair the value of its 15 per cent shareholding in Flybe.

“Flybe believes that the decision is principally based on  BA’s view of its own performance and prospects rather  than an analytical view of  Flybe’s track record and future prospects. Flybe places  on record that it and its advisors disagree with BA’s decision to impair its shareholding in Flybe. We believe that  BA is undervaluing Flybe.”

The spokesman claimed  that BA had “failed to take  into account” that Flybe’s  turnover grew by seven per  cent in the year to the end of  March, that it had cash reserves of £57m and is one of “a  handful of European airlines  forecasting a profit for  2009/10”.

Flybe also pointed out that  the value of Easyjet and  Ryanair shares has risen  while those of major European legacy airlines have fallen in the past 12 months.

“While Flybe’s business  model is different to those of  Ryanair and Easyjet, it is  more closely aligned to the  low-cost model than the full  service, legacy airline,” said  the spokesman.

He added: “Flybe has carefully positioned itself during  these difficult times and it has  managed to strongly increase  market share in its core domestic operations, positioning itself well for further profit growth when the current  recession ends. It is also one  of the few carriers which have  managed to reduce capacity  without affecting its core  route structure.”

The spokesman concluded:  “Flybe feels an impairment in  the carrying value of BA’s 15  per cent shareholding is inappropriate and is more reflective of recent market performance of legacy carriers  rather than Flybe’s regional  business model.”