Flybe’s European routes take off

FLYBE, the largest airline in terms of traffic movement at both Manchester Airport and Birmingham International Airport, saw first half sales rise 9%, with business routes to Europe proving especially strong.

However, the airline said that in common with other UK operators, it had seen a marked slowdown during September.

“As a consequence, the group’s total revenues for H1 2011/12 were circa 1% behind management’s expectations, with costs in line with expectations,” said the airline.

The announcement disappointed the markets and shares fell in early trading.

It said it was too early to determine whether the September performance was a short term reaction to the turbulent macro-economic environment, or whether it is a longer term market adjustment.

Flybe announced in May that it believed the UK market would be weak in winter 2011/12 and said it would therefore de-risk the business by removing growth aircraft for the period. Forward ticket sales revenue for the H2 2011/12 winter period slowed from early September and is currently up 1% year-on-year on broadly flat capacity, below management’s previous expectations.

The board said it would continue to monitor trends and review its winter 2011/12 flying programme to ensure capacity was matched to demand.

Jim French, chairman and chief executive, said: “In the first half of 2011/12, despite some gloomy statistics regarding UK retail sales, we have delivered good growth in passenger numbers, load factors and yields, particularly across our UK to European network.

“It is also pleasing to start the roll out of our European growth strategy and we are encouraged by the positive feedback we are receiving from our new partners, Finnair, on the re-organisation and development of our joint venture, Flybe Finland. Our European Division will continue to focus on the integration which is making excellent progress and will also continue to look for low risk opportunities to expand this business.

“The recent slowdown in sales on our UK domestic routes is obviously a development we are closely monitoring.  In previous years, Flybe has demonstrated the resilience of its high frequency business model by adjusting short term capacity to meet reduced demand and being prepared to cut costs.  Our management team remains acutely focussed on these areas.”

In a trading update ahead of its interim results, the airline said that if the impact of the Icelandic volcano was taken out of the H1 figures, the performance would be around 3% better than last year.

H1 2011/12 saw a total of 6.4m seats flown, an increase of 0.2m over H1 2010/11.  However, after adjusting for the impact of volcanic ash disruption, H1 2011/12 seat numbers were down on H1 2010/11 by 1.7% on an underlying basis, reflecting the airline’s flat year-on-year capacity programme, which was implemented earlier this year.

With the ongoing focus on optimising passenger revenue per seat, the airline said it was pleased that H1 2011/12 had seen an improvement in passenger numbers, load factor and both ticket and ancillary yields.  This resulted in a year-on-year increase in passenger revenue per seat of some 6%, continuing the trends seen in Q1 2011/12.

Interim results for the six months ended September 30, 2011 will be published on November 9.