Flybe Group PLC FLYBE update on Aircraft Purchase (1604E)

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: [phone] 
  Philip de Klerk,     5151 
  Chief Financial 
  Officer 
 Maitland            Tel: [phone] 
  Neil Bennett        5151 
  Andy Donald 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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July 14, 2016 02:00 ET (06:00 GMT)