More cuts planned as Flybe lowers guidance

Flybe, Europe's largest regional airline, has warned that is has experienced another 'very challenging' year, with the forward booking visibility remaining 'extremely limited'.

Looking ahead, the firm expects total year-on-year growth for the year ended March 31st to be between flat and 2.0%, below its previous expectations.

Group revenue for the first quarter, which ended June 30th, was up just 1.6% in the period to August 9th at £163m, while total revenue under management leapt 20.4% to £193.2m, driven by Flybe's entry into Continental Europe through Flybe Finland, the joint venture with Finnair.

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Operated seats flown under management, including contract flying and charter, were 3.9m, up by 22.5% from 3.2m in the first quarter of the 2011/12 year.

Total cash at June 20th was £59.8m, of which £25.1m was free cash.

Jim French, Flybe's Chairman and Chief Executive Officer (CEO) said: "2012/13 is proving to be another very challenging year in the European regional aviation sector with continued weak consumer markets and stubbornly high oil prices. After four years of consecutive decline, the UK domestic air market had shown signs of stabilising this year although June slipped back into 3% year on year decline.

"Whilst the UK to European leisure routes performed well in Q1, the UK to European business market has shown signs of weakness in recent months, leading to today's revised trading outlook.

"We remain cautious over the outlook and do not expect a material recovery in either consumer or business confidence in the short term. We therefore remain focused on executing our comprehensive action plan to both grow the business whilst mitigating cost pressures."

He continued: "As a result of the current revenue outlook, we are targeting further cost saving initiatives through a range of measures, including capacity management and supplier cost reduction. We continue to maintain a tight control on costs, keeping unit cost increases (excluding fuel) in Q1 2012/13 to within 1% of prior year, despite significant infrastructure and regulatory cost pressures."

Divisionally, Flybe UK generated total revenues of £156.4m in the quarter, up 0.7% on the same period the previous year. Operated seats flown were up 1.2% to 3.2m, while scheduled seats flown were 3.1m, down 1.8% on the same the year before.

Passengers totalled 1.9m, down 3.0%, representing a load factor of 62.4% (Q1 2011/12: 63.1%), reflecting the continued challenging market conditions, particularly on UK to European business routes.

Passenger revenue per seat was up 0.4% at £47.99, while costs per scheduled seat for the quarter (excluding fuel, and charter and contract flying costs) increased by 1.0%. Fuel is hedged at $998 per tonne for 91% of forecast burn in the second quarter and 83% hedged for the second half of 2012/13 at $1,015 per tonne.

Flybe Finland generated total revenues of £30.2m in the first quarter, comprising passenger revenue of £9.4m and other revenue of £20.8m, which was primarily contract flying for Finnair.

Operated seats flown at Flybe Finland were 0.7m, of which scheduled seats totalled 0.3m. Passenger numbers and load factor were 0.1m and 43.6%, respectively. Passenger revenue per seat was £35.66.

CEO French added: "Flybe UK's brand market share in the UK regions remains at above 50%, we have a robust and flexible business model and clear growth plans. Although we expect market conditions to remain challenging, we remain confident about Flybe's long term future."

NR