One-off costs send Flybe into the red

AIRLINE Flybe has announced a £15.4m half year loss despite seeing a significantly improved performance in its core UK business, Flybe UK.

The UK operation increased half-year pre-tax profits and became cash generative, the company said. However, this was more than offset by a full impairment of assets related to its joint venture with Finnair and a provision for EU 261 flight delay claims.

The loss after tax of £15.4m compared with a profit after tax of £13.6m for the same period last year. The airline said the result was impacted by £34.3m of one-offs and revaluations, plus the net impairment of £9.9m in its Finland operation.

Flight delay compensation amounted to £6m with the performance further impacted by £10.4m restructuring costs and an £8m revaluation of a loan.

Saad Hammad, Flybe’s CEO, said: “Our UK business performed well in the first half of the year showing the strength of the new Flybe.  We delivered an increased adjusted profit before tax in the Flybe UK business and importantly became cash generative.

“Though our business transformation is far from complete, we are seeing the benefits of improved commercial execution with the right cost base and we now have improved operational and financial disciplines throughout our organisation.”

He said the airline, the largest at Birmingham Airport in terms of passenger volumes, was making progress in addressing the legacy issues within the business, which would ensure we operate with a simpler business model.
 
“We have taken decisive action in removing the overhang of the outstanding $750m order for 20 unwanted E175 aircraft, withdrawing from the Finland joint venture as well as providing for the potential costs for the arbitrary EU 261 regulation for flight delay claims in Flybe UK.  We are working hard to resolve our surplus fleet issue,” he added.

The airline is now taking a measured approach to growth in the second half with the launch of new routes to and from London City Airport.  In addition, it has also announced further expansion with new bases in Bournemouth and Aberdeen.
 
“Whilst there are still a number of challenges ahead, Flybe enters the Winter season with solid momentum in its core UK business,” added Hammad.

The airline said Q3 2014/15 current trading remained in line with management expectations.  Flybe UK’s current forward booking profile for Q3 2014/15 shows seat capacity of c2.6m seats, down by c5% on last year, as of November 7 it had sold c56% of seats against c52% in the same period last year. Passenger revenue per seat is up by c1%.

The business has also hedged the majority of its fuel and foreign exchange exposure in line with stated policies.

Within Flybe UK, passenger revenue per seat increased 8.7% to £54.75 and the load factor was up 8.6ppts to a record 77.2%.

The operation is now on track to deliver £24m of incremental full year cost savings, in line with previously announced plans.

Adjusted pre-tax profit was up £2m to £13.7m, despite the £6m provision for EU 261 flight delay compensation.

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