Flybe turnaround on course with £23m profit

Flybe has reported that its turnaround remains on track with revenue growth in its core business and a return to profitability with an adjusted profit before tax in the six months to 30 September 2015 (1H16) of £21.1 million, compared with a loss of £1.0 million in six months to 30 September 2014.The carrier says the news complements last week's announcement that it had resolved its last major legacy issue with the completion of Project Blackbird concerning surplus E195 jets, and that it positions Flybe well for future profitable growth.Group revenue for the aforementioned six months in 2015 was £339.6 million, up £31.8 million from the £307.8 million reported in the respective period last year. Adjusted total costs went up by £9.7 million to £318.5 million. The company’s total cash at 30 September 2015 stood at £197.2 million, up £26.2 million from the £171.0 million it held at 30 September last year.Flybe UK reported an 11.2% increase in revenue to £330.9m which it says was driven by a 13.1% increase in seat capacity to 5.9 million seats and “improved commercial execution”. A 10.2% increase in passenger numbers to 4.5 million passengers was also achieved,The airline managed a 7% reduction in cost per seat (including fuel) at constant currency having benefited from: lower surplus aircraft cost with the mitigations from flying three E195 aircraft in 1H16; non-recurrence of one-time charge of £4 million for historic EU261 liabilities; and lower costs in aircraft ownership and marketing.Flybe Aviation Services (FAS) reported revenue in 1H16 of £18.5 million, down from £19.3 million in 1H15. The hours produced were impacted by deferral of third party work into 2H16 and therefore decreased to 244,000 hours from 1H15’s 261,000 hours. The deferral of third party work enabled FAS to prepare the return to service of the surplus E195 fleet. These effects, together with more competitive pricing, produced a loss of £0.3 million.Flybe says its long-term business objective is “to become the best local airline in Europe delivering superior returns”. To achieve this, the company plans to continue to operate high frequency services on thin regional routes which mainstream airlines are unable to operate profitably and offer regional customers, especially those travelling on business, a better alternative to rail, road and other airlines in time-saving connectivity.In its 3Q16 trading update (as at 9 November 2015), Flybe UK's current forward booking profile for the quarter foresees capacity up by approximately 13%, around 51% of seats sold versus around 56% in 3Q15, yield up by about 4% and passenger revenue per seat down by around 6%."Our turnaround is on course with a very encouraging performance in the first half. We have returned to profit by delivering significant revenue growth through capacity investment and improved commercial execution, while reducing unit cost,” declared Flybe CEO Saad Hammad. “We are also pleased to have resolved all our key legacy issues. The benefits from this will start to come through in the next financial year.“Competitive pressures are expected to grow in the second half with industry-wide benefit from lower fuel costs and growth in seat capacity,” Hammad continued. “Against this backdrop, we are remaining disciplined in cost control and our capacity growth plans. Our focus will be on building service frequency on our established routes to maximise our appeal to time-sensitive business travellers.“While there are still a number of challenges ahead, Flybe enters the winter season with solid momentum,” remarked Hammad.

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