Flybe continues successful turnaround

Flybe’s Board has reported that third quarter trading for 2013/14 was in line with overall management expectations, highlighting that UK scheduled revenue per seat was up 2.3%, costs per seat (excluding fuel and restructuring costs) were down 5.2% and that in Finland, revenue from white label flying increased by 23.7%.

Phases 1 and 2 of the airline’s Turnaround Plan (announced in January and May 2013), followed by the Immediate Actions (launched by the new management team in November 2013) are reported as being “well advanced”. The Immediate Actions aimed to deliver underlying benefits of £7 million in 2013/14 and £26 million in the next financial year, with around 500 proposed redundancies and estimated one-off and grounded aircraft costs of £14 million this year plus a further £27 million in 2014/15. The company now anticipates that job losses will be around 450, and work is continuing to reduce the cost of aircraft grounding.

In the thuird quarter of the current 2013/14 financial year, there was a 5.0% increase in total revenue under management to £203.5 million. The UK airline had a 0.4% increase in total revenues to £137.6 million despite total seat capacity in the UK being down 2.3%. The 2.3% increase in passenger revenue per seat took the figure to £48.46, while the 5.2% decrease in costs per seat (excluding fuel and restructuring costs) dropped that figure to £41.58.

The 23.7% increase in white label revenue in Flybe Finland JV took the revenue figure to £52.2 million.

So far the turnaround has seen Flybe’s UK route network successfully rationalised for the summer 2014 season (beginning in April), impacting 55 out of last year’s 140 summer routes, including the discontinuation of 30 unprofitable routes.

Additionally, Flybe’s UK base network will reduce from 13 to seven bases by the end of March 2014. The refocus towards the larger bases will result in the closure of bases in Inverness, Aberdeen, Isle of Man, Newcastle, Jersey and Guernsey. Flybe will continue to operate services to and from all of these airports, as part of a total of 119 routes being flown across its UK network in the 2014 summer season.

Surplus aircraft capacity is being addressed by grounding 10 aircraft by the end of March 2014 and a further four by the end of the summer 2014 season. Work is continuing to reduce the cost of this aircraft grounding.

In line with its strategy first to optimise and then progressively to grow its route network, Flybe unveiled on 31 January 2014 a major expansion at Birmingham with seven new routes.

In its efforts to reduce costs further, following the removal by the Group of its divisional structure in November 2013, Flybe has now implemented an integrated organisation structure and completed the streamlining of its senior management team.

The Flybe Board believes that the impact of improvements is already evidenced in the growth in Q3 of Flybe’s share of the UK regional domestic air passenger sector to 49.6%, up 1.2 percentage points from Q3 2012/13.

Finally, the Flybe Finland JV continues to show strong progress in its profitable white label flying operations. A programme to reduce losses in the legacy scheduled risk flying portion of the Flybe Finland business is being implemented with effect from April 2014, with two of the six loss making lines of scheduled risk flying being removed, and Finnair working closely with Flybe on the commercial management of the remaining routes.

Saad Hammad, Flybe’s chief executive officer, commented, “We are on track to deliver £40 million of annual cost savings from Phases 1 and 2 of the Turnaround Plan by 31 March 2014, and significant rapid progress has been made already on the additional Immediate Actions announced in November last year. The transformation of our cost base is being successfully delivered thanks to the hard work and determination of our people and with the support of all stakeholders.

“Taking decisive action gives us a strong platform to implement our strategy, achieve profitable growth and build sustainable value for our shareholders. We are well on our way to becoming Europe’s best local airline,” Hammad concluded.

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