Airline Flybe set to embark on new era as turnaround is completed
AIRLINE Flybe is preparing to embark on a new phase of its development, building on a strong first half which has seen the business enjoy a near 13% revenue hike.
The airline, the largest in terms of passenger volumes at Birmingham Airport, is nearing the end of a three-year turnaround which has transformed the way the business operates.
In the company’s interims statement, executive chairman Simon Laffin said: “We have completed the transformation, which started three years ago. Next year, for the first time since the IPO in 2010, we will have control over our aircraft capacity.
“We can begin to move from being a supply-driven business to a demand-driven business. This will free us for even greater focus on implementation excellence and refining route profitability.”
He said that as passenger numbers were still rising across the industry, the airline saw further opportunities for growth – despite market volatility.
“The aviation market is tough at the moment, with excess seat capacity in the European short-haul market coupled with a weaker pound, and both business and consumer uncertainty impacting all airlines,” added Mr Laffin.
“However, Flybe has a robust balance sheet and cash position. From this strong position, over the next 12 months, we will open our first European base in Dusseldorf and continue to cautiously test routes to maximise the returns from our existing capacity.
“Our aviation services are growing well, particularly as we support the RAF A400M turboprop. White Label flying revenue is also growing, through delivery of the SAS contract.”
Overall, the board said it was confident of Flybe’s resilience and its strategy was unchanged.
The performance in H1 shows a 12.8% increase in group revenue to £383.0m, largely driven by higher passenger volumes in Flybe UK, further development of White Label operations and increased revenue in Flybe Aviation Services.
Pre-tax profit declined dramatically to £7m (H1 2015/16: £22.9m) – a fall of almost 16%. The company has blamed the performance on the fall in sterling, which increased the cost of loans on aircraft, which are charged in US dollars.
At September 30, 2016, the group’s balance sheet showed net assets of £167.1m (March 31, 2016: £154.2m).
Flybe UK saw a 10.2% increase in revenue to £364.6m, while there was also a 13.5% increase in seat capacity, as additional aircraft were deployed.
Passenger volumes increased by 7.1% to 4.8 million in H1 2016/17. The effect of adding new routes and rotations, together with a weak aviation market, meant that the airline’s load factor fell by 4.3 ppts to 72.0%.
There was a 2% decrease in passenger yield to £70.58, due to what the airline described as careful pricing management. However, it said the lower load factor resulted in a 6.9% decrease in passenger revenue per seat to £50.80.
In a Q3 update, it said seat capacity was up by c16%, with c49% of seats sold vs. c52% in the prior year. The yield is down c5% and passenger revenue per seat is down by c9%.
