Flybe sells Gatwick slots to easyJet, slams airport for 'punitive' fees

easyJet has bought all of Flybe's take-off and landing slots at London Gatwick airport as part of the latter's turnaround plan to return to profitability.

The airlines confirmed on Thursday that they have completed an agreement to exchange 25 pairs of arrival and departure slots for £20m. easyJet said that the slots will allow it to provide "additional frequencies on popular existing routes from Gatwick as well as add new destinations across the UK and Europe".

Flybe meanwhile said that it had taken the "very difficult decision" to exit Gatwick from March of next year due to the airport's above-inflation rises in landing fees.

"No business can swallow cost increases of more than 100% over five years and Flybe simply cannot bear such punitive rises," said Chief Executive Officer Jim French.

"When you add to these cost increases the government's policy of charging Air Passenger Duty (APD) on both legs of a domestic flight, I'm afraid it's inevitable that high frequency services from the UK's regions will be squeezed out of Gatwick, as they have been from Heathrow."

The company is to continue offering over 150 routes on its regional network through airports in Manchester, Southampton, Birmingham, Glasgow, Edinburgh, Amsterdam and Paris.

"Gatwick airport may not want those connecting passengers, but others do. We will work with our airports to ensure the UK's regional passengers don't get left in the cold," French said.

A return to profitabilityFlybe updated the market on its 'Delivery and Future Direction' plan, a cost-cutting programme designed to provide the firm with a "solid base for the future development of the business".

The company has so far exceeded its intended 'Phase 1' savings of £25m and is now targeting £30m of annual cost savings for its 2013/14 fiscal year. These savings have come by way of a 22% reduction in its staff from 2,730 to 2,140, as well as outsourcing projects and reductions in supplier costs.

'Phase 2' is already being implemented and targets a further £12m of savings this year and an annual run rate of £23m thereafter, with a further 80 employees to lose their jobs as well as other cost savings.

Flybe stressed that its turnaround plan is being financed "without recourse to shareholders" and said that the measures being taken should help its break-even on a profit-per-seat basis in the first year. In the medium term, the company expects to make a £3.00 profit per seat.

Another significant transaction for the firm has been the agreement with Brazilian aerospace group Embraer to defer 16 new E175 aircraft due for delivery as early as next year until 2017-2019. This will cut Flybe's pre-delivery payment commitments in the winter 2013/14 season by £20m.