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Case Study
The better the question The better the answer The better the world works
Case Study

How to sell a travel business when no one is travelling

Flybe was rescued from insolvency after EY-Parthenon protected the struggling business and found a buyer.

Case Study
The better the question The better the answer The better the world works
Case Study

How do you rescue a grounded airline when everything is up in the air?

EY-Parthenon was appointed to handle Flybe’s administration after a build-up of pressure on the struggling airline.

The past 18 months have certainly been challenging for the travel industry, but it was events prior to the pandemic that led to the EY-Parthenon Turnaround & Restructuring Strategy team working with Flybe for the first time.

The independent airline, founded in 1979, played an important role in the UK economy, providing valuable connectivity between the regions through airports such as Birmingham, Southampton, Manchester, Exeter, Edinburgh and Belfast. As of January 2020, Flybe operated 38% of all UK domestic flights.

But in January 2019, it was in financial difficulty and had entered discussions with several parties about a possible sale. The offers Flybe received were lower than expected and the EY-Parthenon team was engaged to carry out contingency planning in case the company had to be put into administration. The team already had extensive experience of the aviation sector, having worked with companies including BMI, Monarch, Alitalia and Thomas Cook.

However, shortly afterwards, a sale was agreed to a consortium consisting of Virgin Atlantic, Stobart Aviation and DLP Holdings. With the threat of administration over, the EY-Parthenon team withdrew.

Exactly a year later, Flybe contacted EY-Parthenon again. The COVID-19 pandemic had started to affect the business and flight bookings were falling. Several other issues were also having a negative impact on the business, including rising fuel costs, currency volatility, market uncertainty and Air Passenger Duty liabilities. The company had been talking to the Government and shareholders consortium about a £100mn loan, but as travel restrictions were imposed and devastation to the airline industry grew, further funding became improbable. Flybe had no choice but to file for administration in March 2020. Alan Hudson, Simon Edel, Joanne Robinson and Lucy Winterbourne of EY-Parthenon were appointed to handle the process, conscious that no UK airline had ever been rescued from an insolvency.

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Case Study
The better the question The better the answer The better the world works
Case Study

Urgent action and strategic thinking

EY-Parthenon moved quickly to stabilise the situation and create conditions that would make it possible to sell the business.

The role of an administrator is to rescue a company, if possible, and if not, to recover as much value as they can for the company’s creditors. But from day one, the EY-Parthenon team had more immediate concerns. By 11 p.m. the night before Flybe entered administration, the EY-Parthenon and Flybe leadership teams agreed to ground their fleet of aircraft so that, in the early hours of the next morning, the administration could be affected.

Meanwhile, thousands of passengers were travelling to airports expecting to board a Flybe flight that day, so the first challenge the EY-Parthenon team faced was a logistical one. After they had quickly formulated an operational plan, they dispatched members of EY-Parthenon staff to 26 airports across the UK and Europe to help brief Flybe’s 2,200 employees, and communicate to over 20,000 passengers that their flights had been cancelled.

A key priority was to negotiate with the Civil Aviation Authority (CAA) about Flybe’s operating licence and air operator certification. Without these, Flybe would lose access to valuable assets and vital permissions to function, including UK and EU airport slots.

Finally, the EY-Parthenon team had to contact all of Flybe’s aircraft lessors, that is the companies from whom they leased their aircraft and engines. Naturally, the lessors wanted to know where their planes were parked, how they were going to be maintained and when they would be paid what they were owed.

To add to the complexity, within two weeks of the administration filing, the UK went into lockdown and the EY-Parthenon and Flybe teams were required to work from home. Without the ease of face-to-face contact, the EY-Parthenon teams were navigating new and unfamiliar practical and operational challenges on a daily (if not hourly) basis. As a solution, they transitioned the EY-Parthenon and Flybe teams to a stable online platform, from which they could interact and continue their work.

This platform enabled vital asset and property inspections via video-conferencing and, ultimately, the online sale process of an international M&A. “Carrying out an online administration was a first,” says Simon Edel, EY-Parthenon Turnaround & Restructuring Strategy Partner. “The key to a successful administration is usually founded on building essential client and stakeholder relationships face-to-face’. This was not a luxury available to us, but we were able to react and adapt quickly.”

Creating the basis for a sale

With the immediate priorities addressed, the EY-Parthenon team could start thinking strategically, as Joanne Robinson, EY-Parthenon Turnaround & Restructuring Strategy Partner explains: “There was a focus on what short-term sources of liquidity we could access and monetise. We needed to have some lifeblood in the administration to run a marketing process and see if there was a better outcome than the liquidation of the group.”

This led to major milestones like the sale of a subsidiary called Flybe Aviation Services, which held the strategically important maintenance contract for RAF Brize Norton, and the sale of the airline’s training academy in Exeter, which will now be a hub for tertiary-level skills training by Exeter College.

Credit card acquirers had also reserved large amounts of cash collateral from Flybe’s former customers, in case they ever needed to fulfil refund claims for cancelled flights. These funds were a key source of liquidity for the administration and, through close collaboration with the credit card acquirers, EY-Parthenon managed to negotiate their release sooner than expected.

The EY-Parthenon team successfully reactivated Flybe’s maintenance licence with the CAA, which allowed it to run a maintenance, repair and overhaul business for the aircraft lessors and others. This generated trading income and helped preserve the value of each aircraft until it was collected.

Having stabilised the business, the EY-Parthenon team was able to run a full global M&A process to sell the airline. “Within 48 hours of starting, we had contacted over 70 airlines across the globe,” says Mike Parr, EY-Parthenon Transaction Strategy & Execution Partner. “That got us sufficient interest to keep the airline alive in a challenging market, where consumers were adapting to staying at home and not flying.”

The M&A process attracted nine credible expressions of interest and the ultimate sale of Flybe to a new company, called Flybe Ltd and, as Edel explains, “the sale provided the possibility for growth, new jobs and the chance for Flybe Ltd to be a valuable economic contributor to regional communities across the UK and EU.” In the context of the Government’s ‘levelling up’ agenda and its emphasis on restoring regional connectivity, the prospects are good.

Girl checking her flight in the digital board
Case Study
The better the question The better the answer The better the world works
Case Study

Experience, capability and trust

By managing and negotiating with stakeholders, EY-Parthenon created the right conditions for an unprecedented sale of an insolvent airline.

EY-Parthenon’s work with Flybe is ongoing and has involved more than 150 people from seven different sub-service lines.

“It’s a multidisciplinary team that has touched almost every part of the firm,” says Edel, adding that this is one of our key strengths. “We’re a trusted brand, we’ve got the depth of experience in the aviation sector, we’ve got the breadth of capability and we’re trusted by all around the table.”

Looking back on the past year, Parr reiterates the complexity of the task the EY-Parthenon team was faced with. “The number of stakeholders that you need to manage to keep an airline alive is phenomenal,” he says. “It starts with the employees and creditors, but there were also the regulators, or CAA, other governmental departments, airport slot coordinators, and suppliers.

“Being able to manage that and keep all these moving parts aligned and in sync was difficult, but what we achieved has ultimately facilitated the rescue of an airline, which stands to make an important contribution to local economies and the air travel sector as each rebuild after the end of the pandemic.”

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What EY can do for you

We deliver solutions at pace, supporting clients as they recover, perform and improve. Whether you are a public or private company, government institution, investor or financial stakeholder, we work closely with clients with a focus on execution to transform financial and/or operational performance from value recovery, preservation and through to value creation.

We offer deep insight and practical on-the-ground support to help you answer:

  • How can I establish an effective Crisis Management team to get more control of the situation?
  • How can I build and secure liquidity, managing the impact of disruption between finance and operations?
  • How can I get more visibility on potential business risks and give clear recommendations for action?
  • How can I protect business continuity?
  • Who can help me develop options for a rescue or recovery plan; then help me find capital to support it and negotiate with my stakeholders?

We offer the support you need to achieve your objectives:

  • Contingency planning and insolvency services

    Most restructurings need a “Plan B” — whether as a contingency plan to provide comfort for directors and stakeholders or, alternatively, for financial stakeholders to create a credible point of leverage to break the deadlock and help all parties reach a consensual deal. In particularly challenging situations, when directors and businesses are facing increasing risks and challenges to continued trading, we create the time, space and environment to develop and deliver the right solutions.

    We work with management and financial stakeholders to use the pace, protection, powers and flexibility available under insolvency laws to address the issues threatening a business’ survival. We use contingency planning and insolvency solutions to create restructuring legacies by increasing the chance of a consensual restructuring through a credible “Plan B,” delivering a rescue that could not otherwise be achieved, preserving and recovering value, stabilizing critical services, and protecting jobs or by providing a controlled exit.

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  • Corporate simplification services

    Group structures can become increasingly complex through M&As, JVs and organic growth. This can lead to increased costs, as well as difficulties managing risk, simplifying operations, improving transparency and complying with changing regulations.

    We have experience supporting the complete spectrum of organizations, whether large multinational companies seeking to reduce their global entity footprint, or a small domestic organization looking to remove a single entity from its structure for a specific purpose. Our team integrates restructuring, tax and financial consulting knowledge to help organizations assess, rationalize and simplify their legal entity structures across the following key phases of corporate simplification: setup, group complexity analysis, program management, due diligence, and issue resolution and entity eliminations.

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  • Non-performing loans services

    Non-performing loans (NPLs) remain a challenge for banks, particularly in these times of economic uncertainty.

    Our loan portfolio solutions team brings together experienced operators and deal advisors to advise financial institutions about their non-performing loan portfolios and also the buyers of those portfolios, delivering value through our breadth of knowledge and expertise.

  • Liquidity and working capital services

    The adage that “cash is king” is more relevant today than ever. Dynamic and disrupted markets, geopolitical uncertainty, and ever-growing corporate transparency are putting increasing pressure on companies’ liquidity and cash flows. Many management teams struggle to sustain good control over short-term cash flows and the working capital that drives them, leaving the business vulnerable to market and operational changes.

    We have experience supporting the complete spectrum of companies, whether a successful business seeking to enhance shareholder value or an organization experiencing a cash crisis. We help you develop the three main ingredients of strong working capital management: identification of cash-generating opportunities, cash flow forecasting, and visibility and control through our advanced digital analytical techniques.

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  • Interim management: Chief Restructuring Officer/Advisor

    EY can help with interim management acting as a Chief Restructuring Officer (CRO) and offering Chief Restructuring Advisor (CRA) services. Restructuring or turning around an organization brings many challenges on top of the daily demands of running a business, for example: managing competing agendas, creating time to develop options, knowing which option is the right one when information may be imperfect and executing decisions at pace to maintain stakeholder support in a stressed environment.

    We create understanding, alignment and support with internal and external stakeholders. We focus on actions that deliver transformational outcomes and provide interim management solutions, including offering a CRO or CRA, to help you deliver results.

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  • Preserving stakeholder value

    Stakeholders are asked to respond quickly when businesses underperform, or suffer liquidity shortfalls or value erosion. We help provide support in a rapidly changing environment when information is incomplete, agendas no longer align and confidence is reduced.

    We work with all stakeholders to preserve, create and realize value through restructuring advice, critical appraisal of a company’s ongoing viability, stakeholder intermediation, options analysis and entity priority analysis.

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  • Debt restructuring, raising capital and M&A services

    Preserving value for a company and its stakeholders often requires a reshaping of the capital structure and assets in the portfolio. This is often achieved by a combination of financial restructuring and liability management, together with M&A activities to dispose of non-core assets and potentially source new equity. EY professionals are experienced in helping you analyze, structure, negotiate with stakeholders and execute the best possible solution.

    In the USA, Ernst & Young Capital Advisors, LLC (EYCA) is a registered broker-dealer and member of Financial Industry Regulatory Authority (FINRA: and offers investment banking services with access to EY debt restructuring, M&A, debt capital markets and equity capital markets professionals across the globe.

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  • Rapid value creation services

    Most businesses are likely to experience operational challenges and underperformance at some point. While the root causes can be buried, the negative impact can be highly visible — profit warnings, declining performance metrics, failure to achieve project milestones, loss of customer contracts or management departures.

    Whether a business is in crisis or is simply facing an operational challenge, our team is experienced in helping management teams identify and prioritize the most critical issues, stabilize the business, establish a leadership and stakeholder consensus around the solution, in order to rapidly improve performance and create value.

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  • Private equity value creation services

    Our hands-on value creation leaders help PE companies (and sponsors) deliver their investment case by accelerating cash and profit improvements, from ideation to results. We prioritize our involvement to focus on situations we know best: complex carve-outs, functional transformations, and instances of stress or distress.

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Fashioning a sustainable future for an online retailer

Watch how EY teams have helped ASOS to identify opportunities to unlock value, making the retailer more resilient and better prepared for the future.

Restructuring and turnaround awards and recognition

Some of the recent awards won by member firms of Ernst & Young Global Limited include:

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TRI Awards 2020: International Firm of the Year winner (global award)

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IJGlobal Awards 2020:  European Social Infrastructure Healthcare PPP deal of the year winner (EMEIA award)

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TRI Awards 2020: Best Use of Technology winner (UKI award)

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Pre-Pack Restructuring Of The Year — Mid-Markets; Industrials Restructuring Of The Year; Private Equity Deal Of The Year — Large Mid-Markets

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