Flybe’s turnaround plans suffered a setback today after the regional airline warned its full-year results were likely to be weaker than expected.
Shares in the Exeter-based firm slumped by a fifth as it revealed revenues fell 3.8% to £126.8m during the final three months of last year, adding that it does not expect to make a profit in the current financial year to March 31.
The airline is one year into a three-year turnaround plan that has seen it cut over 1,000 jobs and unprofitable routes after seeing passenger numbers fall in the wake of the financial crisis. Flybe is Europe’s largest regional airline, flying 67 planes to 199 routes across 14 countries.
It reduced seat capacity by 6.1% to 2.5m in the third quarter of its financial year but the need to keep fares low has resulted in a 5.2% reduction in its passenger yield to £67.65.
Shares fell almost 22% today as the company said it expects to achieve break-even in the current year, when some City analysts had forecast it to make a pre-tax profit of around £9m.
Liberum analyst Gerald Khoo said the firm’s London City Airport routes introduced in October were taking longer to mature, and it also expected to retain unwanted aircraft on its books for longer than expected.
The broker cut its annual pre-tax profit forecast to £100,000 from £8.8m.
Flybe also warned that it will not benefit from the recent fall in oil prices as its long-term hedging policies will be in force until the 2016/2017 financial year.
The carrier had posted its first pre-tax profit in four years last June but swung back to a half-year loss by November due to one-off costs and a charge related to the exit from its loss-making joint venture, Flybe Finland.
Chief executive Saad Hammad said: “Flybe’s improvement in its core UK business continues to progress. Only a year into our three-year transformation we now have a platform which enables us to compete in a tough environment where the consumer demands value.
“We have responded to that by keeping our fares low and launching new routes.”
Looking ahead to the coming three months, the firm said seat capacity was set to jump 14% to around 2.6 million seats, though passenger revenue per seat would be down by 3%.
Flybe said it launched 20 new routes for this summer, including nine from its new base in Bournemouth and three domestic routes from London Stansted.
It has also launched a “hop-on, hop-off” service in October linking Aberdeen, Leeds Bradford, Southampton and Jersey.
The carrier said: “We continue to monitor this unique service proposition and early performance is very promising.”
It added that since the launch of its six new routes from London City, it has cut its Inverness service and reduced its Exeter route, while adding capacity on the strongly performing Edinburgh and Belfast routes.