UPDATE 1-Virgin-Flybe UK airline deal gets EU clearing, to cede slots

European Union antitrust regulators cleared on Friday the $2.8 million acquisition of British airline Flybe by Connect Airways, a consortium created by Virgin Atlantic, Stobart Group and investment adviser Cyrus Capital.

The final approval of the merger, whose details were made public in January, is conditional on the release by Connect Airways of slots for the routes connecting the English city of Birmingham to Amsterdam and Paris, the EU executive said in a statement. "Today is an important day as Connect Airways takes full control of Flybe," said Lucien Farrell, chairman of Connect Airways. The merged company will now focus on expanding its regional network and franchise business in Britain and Ireland, it said in a statement.

Under the deal, the consortium will provide a 20 million pound ($25 million) bridging loan facility to support Flybe's working capital requirements and up to 80 million pounds of funding would be made available once the deal is completed. Brussels was concerned that after the merger those routes could have fallen under a near monopoly in favor of the Franco-Dutch giant Air France-KLM, which has acquired Virgin Atlantic together with Delta and the Virgin Group of Richard Branson.

To allay the EU Commission's concerns, Connect Airways committed to the release of five daily slot pairs at Amsterdam Schiphol airport and three daily slot pairs at Paris Charles de Gaulle airport. "The commitments fully address the competition concerns identified by the Commission," the EU executive said. Flybe, Britain's biggest domestic airline, operates routes from about 25 British airports, including domestic connections to London's Heathrow. Connect Airways is 40% owned by Cyrus' unit DLP Holdings. Stobart Group's aviation unit and Virgin Atlantic own 30% of the consortium each.

($1 = 0.8004 pounds)

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