Lyon-based Proteus Airlines has bought fellow regional carrier Flandre Air in a deal that will see the combined company with a turnover approaching FFR1 billion ($175 million) and a fleet of some 50 aircraft.
Both airline names will disappear in the merger although it is not yet being revealed what the new carrier will be called. An earlier deal for Regional Airlines of France to take 34% of Flandre Air has been scrapped.
Proteus is strongly linked to Air France and its alliance partner Delta Air Lines, which holds 22% of its equity; while Flandre Air has been less intimately linked to the oneworld alliance by virtue of being a franchisee of Air Liberte, in turn 70%-owned by British Airways.
A large proportion of the new carrier's operations will be based at Proteus' main hub at Lyon Satolas Airport - although fleet commonality with Embraer and Raytheon Beechcraft machines will ensure maintenance continues at Flandre Air's north-eastern French base of Lille.
The takeover was substantially prompted by difficulties in reconciling Flandre Air's commitment to acquire 37-seat Embraer ERJ-135s for its inter-regional services with the preference of Air Liberte to concentrate on trunk routes. The Embraer deal was struck before the Air Liberte link was forged.
"We are the launch customer for the ERJ-135 in Europe and originally inked an agreement with Regional Airlines who were due to take a 34% stake, but this was suspended now we have found Proteus Airlines," says Flandre Air marketing spokesman, Bertrand Cuisinier.
"The goal is to create a totally new company and to provide finance for our jets with this new investment. Air Liberte were more interested in their trunk routes such as Paris-Toulouse and Paris-Bordeaux, while not wanting to focus on inter-regional lines as we do, for example, Rennes-Strasbourg and Lille-Clermont Ferrand".
Flandre Air employs some 240 staff mainly at Lille-Lesquin Airport, which will be retained as a maintenance base for the new Embraers, of which the first two are due for delivery next week.
The ten ERJ-135s will complement a similar order by Proteus for 13 of the Brazilian aircraft in a mixture of -135, -145 and -170 variants, while absorption of the north-east regional will increase the Lyon carrier's fleet by a total of 25 aircraft.
Proteus is closely linked to Air France for which it operates 20 aircraft under the flag carrier's livery and Flandre Air's fleet of ten Embraer ERJ-135s, nine ERJ-120s and six Raytheon Beechcraft 1900Ds will now make some 50 machines available for Air France secondary routes under a franchise arrangement.
Delta Air Lines, with which Air France concluded a major co-operation agreement this year, has a 22% stake in Proteus Airlines, but a spokesman in Atlanta is reluctant to confirm if the new purchase will affect operations.
"Our connection is strictly through the minority stake and reflects our increased interest in the French aviation market. We are pleased with our investment in Proteus and are more looking forward to more growth in France. We are not going to speculate any further," he says.
Air Liberte chairman, Marc Rochet, who declines to reveal the value of the 100% sale to Proteus, says he was asked to invest more capital in Flandre Air but declined the offer, telling the French newspaper, La Voix du Nord: "At this difficult moment for air traffic, we feel it is better to remain with our leasing agreements with Flandre Air which are due to run for five years."
However, a spokeswoman for Air Liberte says that even this deal may now be open to question as negotiations between the two airlines are currently taking place concerning future arrangements.
The proposed name change for both carriers may also help to dilute negative public perception of Proteus Airlines, which suffered a severe setback in July last year when one of its Beechcraft 1900D aircraft collided with a Cessna 177, killing all 15 people involved.
Reports from the French accident investigation branch, (BEA) criticised the Proteus captain's decision to deviate from his flight-plan prior to the mid-air collision.
Flandre Air had a turnover of FFR280 million during 1998 and posted break even net results, while Proteus Airlines turned in profits of around FFR12 million on a FFR480 million turnover. Apart from the 13 ordered Embraers, Proteus operates seven Fairchild Dornier 328-100s, one Fokker 100, four Raytheon Beech 1900Cs and ten Beech 1900Ds.
Proteus Air did not return repeated calls and British Airways could not immediately comment.