Virgin Atlantic opens talks to buy struggling budget airline Flybe

Virgin Atlantic has opened talks with struggling low-cost airline Flybe over a possible takeover.

The airline partly owned by Sir Richard Branson has emerged as a surprise potential buyer after the Exeter-based airline put itself up for sale earlier this month, Sky News reported.

Sources said Virgin Atlantic saw the move as an opportunity to feed passenger traffic into its long-haul network and also access sought-after space at Heathrow Airport reserved for domestic flights.

It comes four years after the transatlantic airline announced the closure of its domestic flight subsidiary Little Red.

Flybe confirmed it was seeking a sale earlier this month after profits nosedived 54 per cent in the six months to the end of September.

A combination of higher fuel prices, a weaker pound and falling customer demand hit the airline, while it is committed to leasing Embraer jets between July and December next year, at a total cost of $114m (£88.5m).

It also announced a new strategy to use existing assets to generate cash and strengthen its working capital.

It has since raised £5m from the sale and leaseback of a hangar facility at Exeter and Devon Airport and a further $5m secured against a Bombardier aircraft.

Shares in the airline halved last month when the company issued a full-year profit warning, ahead of its half-year results last week.

Profits fell to £7.4m down from £16.1m the previous year.

Basic earnings per share dropped by more than half to 3.5p, and Flybe said it will not pay a dividend.

Flybe told investors the company was in discussions with a number of “strategic operators” regarding a potential sale and has appointed Evercore as its financial adviser.