Flybe reveals dramatic reduction in cost base

AIRLINE Flybe is claiming success for its turnaround plan after revealing that total group costs have been reduced by 16.6%.

More than 500 staff were made redundant by the airline last year as it put in place radical plans to overhaul its operations.

Now, in a quarter one interim management statement, it is suggesting its reorganisation is starting to pay off.

Flybe – Birmingham Airport’s largest operator in passenger volume terms – said an encouraging start to the year shows the benefits of a disciplined approach across four focus areas: capacity, revenue, costs and organisation.
 
The airline has seen a 17.2% reduction in seat capacity to 2.5m seats (Q1 2013/14: 3m seats) and a 9.2% improvement in aircraft utilisation with block hours per operating aircraft increased from 7.1 hours to 7.8 hours.

Flybe said it has reduced the number of loss-making scheduled flights but it says it is in talks with Finnair about the poor performance of its joint venture partnership in that country.

The carrier has seen a 9.5% growth in passenger revenue per seat to £52.79 and says the 11 new routes which were launched this summer are performing in line with route assessment model expectations.

During the period the Flybe brand was re-launched, including new purple livery and a redesigned website.

In the crucial area of expenditure, Flybe said there has been a 16.6% reduction in total group costs (excluding grounded aircraft and USD loan revaluation gains).

And there has been a 1.6% reduction in UK costs per seat (excluding marketing and grounded aircraft) to £51.20.

Flybe said its £24m planned cost savings are on track in 2014/15, taking cumulative annualised savings in the turnaround plan to £71m.
 
Some 16 new routes are being launched for Winter 2015, including five new London City routes and extension to year round operations of six of the Birmingham summer routes. Further routes are being actively considered.

Saad Hammad, chief executive officer, said: “Flybe’s momentum continues, with an encouraging start to the year. Our focus and discipline is delivering the operational improvement in the underlying business that we demand and which is required to drive our future profitability and shareholder returns.

“We have launched a number of new routes and products, re-launched our brand and announced a number of exciting strategic developments with new partners.  We have achieved a significant amount in the quarter, with substantially more to do in the months ahead.”

“Our plans to address the few remaining legacy issues in the business, especially the grounded E195 aircraft and the loss-making scheduled flying business in Finland, are progressing and I look forward to providing further updates in due course.”