About 15,000 British Airways customers have had their flights cancelled after the sale of the airline's regional business.
The loss-making BA Connect has been offloaded to Flybe in a deal that creates Europe's largest regional carrier. Unprofitable services have been culled as Flybe prepares to turn around a business that is losing £1m a week. It will cut 900 flights this month as it phases out 25 unprofitable routes including Manchester to Madrid and Hamburg to Edinburgh.
BA apologised for the cancellations as it confirmed completion of the takeover yesterday. The airline has had eight months of disruption from terror threats, heavy fog at Heathrow and a threatened cabin crew strike. It said half the affected passengers would be transferred to Flybe because their bookings were on Flybe routes, while the rest would be re-routed through Heathrow. For instance, a Manchester to Madrid passenger would be flown by BA from Manchester to Heathrow, then put on a BA flight to Madrid.
BA is in effect paying Flybe to take the business off its books by handing it over with a cash payment in return for a 15% stake in Flybe, which is majority-owned by the Jack Walker Trust, which controls the late steel tycoon's assets.
It is understood that BA will pay up to £150m to offload BA Connect. It is paying £62m in cash to Flybe and £34m to cover impairment charges on the BA Connect fleet. A further £33m is being paid into the BA Connect pension fund and BA has offered up to £10m to cover refunds for cancelled flights. Legal costs related to the deal will take the total to about £150m.
BA is also in talks to transfer 730 ground handling staff at Aberdeen, Edinburgh, Glasgow and Manchester airports to Aviance UK, part of the Go-ahead transport company. It said the jobs were no longer viable after the sale of BA Connect. Flybe also expects to cut about 10% of BA Connect's 2,050-strong workforce.
The chief executive of Flybe, Jim French, said a planned flotation of the airline was not a certainty and management would be "fully preoccupied" with combining both businesses rather than considering an initial public offering.
Flybe plans to impose the low-cost business model that rescued it from collapse in 2002, when the Exeter-based airline was called British European. It adopted the low-cost principles of charging for food, focusing on internet sales, closing unprofitable routes and reducing its fleet to two types of aircraft. It also plans to replace BA Connect's 30-plane fleet, which will be partly covered by BA cash.
British Airways said its passenger load factor, a measure of how efficiently it filled planes, fell to 67.5% in February from 71.2% in the previous year. Europe's third-largest airline said the decline in passenger numbers was due to the recent industrial dispute with cabin crew, which put off many business passengers.
