Thursday 19 September 2019

Flybe shares slump after fresh profit warning

Flybe boss Christine Ourmieres-Widener. Photo:
Flybe boss Christine Ourmieres-Widener. Photo:
John Mulligan

John Mulligan

Shares in UK regional airline Flybe plunged by as much as 20pc in early trading yesterday as it issued a profit warning - its second in just over six months.

The carrier, headed by former CityJet boss Christine Ourmieres-Widener, warned that its first-half loss would be lower than anticipated due to higher -than-expected maintenance costs.

Some of Flybe's services are operated on a contract basis by Dublin-based Stobart Air, which also operates the Aer Lingus Regional service.

Flybe said that the higher-than-expected aircraft-maintenance costs it has incurred in the first half of its financial year "reflects the drive to further improve the reliability of its aircraft, particularly the Bombardier Q400 turboprop".

"A full review of the maintenance strategy has now been launched which aims at a significant improvement of aircraft performance and costs," it added.

The airline now expects its adjusted profit before tax to be between £5m (€ 5.6m) and £10m (€11.2m) in the first half of its financial year. That compares to a pre-tax profit of £15.9m (€17.5m) in the first half of its previous financial year. It added that the figure for the first half of the current financial year includes £6m of additional IT costs as Flybe rolls out a new digital platform.

Flybe also issued a profit warning back in March, as it shouldered unexpected costs.

"While half-year profits are lower than expected, I am confident that we are still on a clear sustainable path to profitability in line with our stated plan," Ms Ourmieres-Widener said.

"The increased maintenance costs are disappointing, but we are already addressing these in the second half and remain focused on improving our cost base and reliability performance," she said.

The chief executive, who took over at the airline at the beginning of this year, added that Flybe's business-improvement plan was delivering benefits, with its fleet size reducing, and yield and load factors increasing.

Flybe has struggled in recent years, battling intense competition and fare wars across Europe. It floated on the stock exchange in 2010, but its shares were changing hands yesterday at just 37p, having originally listed at £2.95. The airline had to raise an extra £150m in 2014. It has posted a full-year, pre-tax profit only twice since the initial public offering.

The airline reported a loss of £20m (€22.4m) in its last full financial year as it continued efforts to realign its service with demand. That compared to a £2.7m profit in the previous financial year. Its revenue rose by 13.4pc to £707.4m, however.

Flybe's fleet size peaked at 85 aircraft this year and is declining as it cuts capacity from its network.

"Flybe has never been in this position before," Ms Ourmieres-Widener told the Irish Independent in an interview earlier this year. "We control our fleet. Being able to fly a network with only routes that are profitable has never happened for us in the past few years. We can look at what routes are profitable, what routes are in difficulty."

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