British Airways (BA) has reached agreement in principle to sell the regional operation of its subsidiary carrier BA Connect to UK budget carrier Flybe.

As part of the deal BA will take a 15% stake in the Exeter-based regional. The deal will not cover BA Connect services from London City airport and between Manchester and New York. Neither does it cover the regional ground-handling business, British Airways Regional.

“The business will be operated in line with the successful Flybe business model concentrating on short-haul and European major city markets,” Flybe says in a statement.

“BA will ensure that the new business has sufficient funding in order to achieve its growth targets and the transition out of the current BA Connect fleet. In return it will acquire a 15% stake in the new business.”

On rebranding its regional operations as BA Connect at the start of the year, BA chief executive Willie Walsh had said it would sell or close down the carrier if it could not make a profit.

“Point-to-point regional operations are not a strategic part of our business and we believe that such activities are better undertaken by a regional low-cost airline,” explains Walsh.

“Despite the best efforts of the entire team at BA Connect, we do not see any prospect of profitability in its current form.”

Once the deal is completed, there will be a transition period until the handover of responsibilities is undertaken for the start of the summer schedule in March next year. Flybe is expected to carry six million passengers over the same period, operating more than 100 routes.

Kieran Daly thinks the Flybe management has done a remarkable job. Read his blog.