Flybe reports 1H profit; turnaround continues; more job cuts

Flybe has announced a significantly improved financial performance for the first half of its financial year, with a profit after tax of £13.6 million, compared with a £1.6 million loss in the first half of the previous financial year.
The Group revenue in the first half of FY2013-14 (1H13/14) – excluding joint venture revenue – was £351.1 million, compared with £340.8 million in the first half of FY2012-13 (1H12/13), an increase of 3.0%. The company reported £10.5 million operating cash inflow before increase in restricted cash and restructuring costs, up from £1.6 million in 1H12/13.
The airline emphasised that the first two phases of its turnaround plan are on track to deliver savings of £40 million this year and £45 million in 2014-15.
Highlights for the UK airline operation in 1H13/14 included a 5.6% increase in passengers to 4.3 million with a 3.6 percentage point increase in the load factor to 68.6%. There was a 0.9% increase in passenger revenue per scheduled seat to £50.35 from £49.92 in 1H12/13.
In 1H13/14, Flybe UK had a 1.3% increase in total revenues to £328.2 million as well as a 1.3% decrease in costs per seat to £51.30. On a constant currency and fuel price basis, costs per seat decreased by 3.1%.
Flybe Finland announced £110.6 million in contract flying revenue, up from £36.7 million in 1H12/13.
Updating further on the turnaround plan, Flybe stated that it will have two engines of growth: a regional branded airline giving a nimble and customer-friendly, scheduled service bringing people together within a country and connecting people in the regions to international carriers at metropolitan airports; and a regional white label model where Flybe will become the leading regional provider for mainstream European airlines.
Flybe’s operations have been reorganised into a single management structure and an Immediate Action plan was announced with the 1H13/14 results and is being implemented with three elements:
• optimise configuration: rationalise route network, review fleet mix, remove surplus capacity and improve aircraft and crew utilisation;
• reduce costs further: all aspects of the business are being reviewed to drive further savings; and
• improve commercialisation: optimise pricing and revenue management, refocus network development, strengthen route management, step change marketing impact and develop trading partnerships.
These Immediate Actions are expected to provide a further benefit of £7 million this year and £26 million per annum from next year on. Flybe will incur £5 million of one-off costs and an estimated £9 million of surplus capacity costs in 2013/14. The cost of surplus capacity is expected to rise to around £27 million next year, but will reduce significantly in each year thereafter.
These actions may also result in the loss of around 500 jobs spread across the business. Consultation with trade union and staff association representatives on these proposals will start shortly.
“I joined Flybe in August this year. It was clear to me that the existing Phase 1 and 2 cost savings were necessary, but we simply needed to do more and to do it immediately,” explained Flybe CEO Saad Hammad. “The business needed action now and so we are explaining our next phase which encompasses a review of everything we do and how we do it. Most of the immediate actions are completed, being implemented or already being consulted on. Unfortunately there is a proposal for further redundancies. We will consult with the trade unions and employees to ensure that this is done fairly and delivers the right outcome for the business.
“We will make Flybe the best local airline in Europe. This is ambitious, but achievable provided that we can transform our cost base and efficiency now,” added Hammad.
Flybe’s fleet changes will see two Embraer 175s enter UK airline service in 2H13/14 with three Q400s set to be handed back to their lessors. No aircraft are contracted to be delivered in 2014/15.

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