Flybe warns on profits as tough Q4 impacts performance

European airline Flybe has been forced into cost cuts and make reductions in capacity as weak markets impact performance during its final quarter.

In a Q4 update, the airline, which is the largest carrier by volume at both Birmingham and Manchester airports, said the actions had helped to prop up passenger revenues although adjusted pre-tax profit is likely to show a small loss.

For Q4 as a whole, it said: “The period has been characterised by weak demand in an uncertain consumer environment, together with price competition arising from overcapacity amongst airlines and sharpened price activity from rail operators. Weather related and operational cancellations, as well as industrial action mainly by French air traffic controllers also impacted revenue.”

As a result of its cuts, the airline slowed its year-on-year seat capacity growth further to 10% (Q3: 12.7%).

The airline said it was also planning a major upgrade to its core systems, which would significantly improve the customer experience and allow greater ecommerce activities.

As a result, a full review of software assets and IT contracts is being conducted which is expected to result in additional cost and non-cash write downs, which could impact profit by around £5m to £10m in the current financial year. Excluding this, adjusted pre-tax profit for the year ended March 31, 2017 is expected to be a small loss.

However, it said that although load factor fell by around 1.4 percentage points year-on-year in Q4, this was an improvement compared to the previous quarter’s 1.7 ppts reduction. Passenger yield rose by 2.9% in Q4 (Q3: 2.8%). As a result, estimated passenger revenue rose by 9.8% in the final quarter (Q3: 13.5%).

Christine Ourmieres-Widener, the airline’s chief executive, said: “I continue to be very excited about the opportunities in Flybe, especially as we are now able for the first time to take control of our fleet size to reduce overcapacity.

“Flybe is increasingly a digitally enabled business, with 80% of bookings already being made via our website. To seize this opportunity, we must first rebuild some of our core systems and this is now starting. We shall continue to reduce costs, work with our partners to improve efficiency and stop unprofitable flying.”

The airline will announce its full year results on June 8.