UK Edition
Fares squeeze and strikes expected to push Flybe to a loss
A squeeze on fares, combined with strikes, cancellations and poor weather have conspired against airline Flybe and are expected to push the group to a loss.
The Exeter-based airline said the final quarter of its financial year, which ends in March, had also been hit by weak demand and vicious competition from rivals who are competing aggressively on fares given the high levels of overcapacity in the industry.
The airline felt the pressure from rail operators too, which have also been able to cut their fares thanks to the persistently low oil price. A large portion of Flybe’s routes are domestic UK flights, meaning that trains are a viable competitor.
The update, which also said weather-related cancellations and French air traffic controller strikes had hampered performance, pushed the shares down roughly 4pc to 41.3p.
Chief executive Christine Ourmieres-Widener, who joined the airline in December having run Dublin-based Cityjet, said the company had moved to curtail the amount of extra seats it planned to make available in a bid to protect itself from the challenging conditions. The business increased its seat capacity by 10pc during the three-month period, compared to 12.7pc in its third trading quarter.
Load factors - a measure of how full, on average, its planes are - fell by 1.4 percentage points in the company’s final quarter, but this was less than the 1.7 percentage point drop in the prior three months.
Even excluding an expected £5m-£10m IT upgrade, the company said it still expected a small adjusted pre-tax loss.
Flybe has taken on nine new Q400 aircraft, which will take its fleet to its peak size of 85 aircraft next month.
But six aircraft that are coming to the end of their lease term will be returned to their owners, the company said, reducing the fleet size once again.
This will be a relief for investors given the company has previously had problems with having too many aircraft. Former chief executive Saad Hammad was responsible for spearheading the company’s Project Blackbird, which sought to deal with the excess aircraft it had on its books.
Ms Ourmieres-Widener said: “We shall continue to reduce costs, work with our partners to improve efficiency and stop unprofitable flying.”
In terms of summer trading, 18pc of its capacity has already been sold, in line with the prior year.