Flybe issues profits warning

A FURTHER fall in demand for domestic flights in the UK over recent months triggered a profits warning at airline Flybe today.

Europe’s biggest regional flier, which operates from airports including Norwich, said revenues in the final three months of 2011 would be significantly lower than it had hoped, fuelling fears in the City for a full-year loss.

Flybe said the UK domestic market suffered an underlying sales decline of 8% in its third quarter compared to a 6% drop in the previous half-year, with December being “particularly disappointing”.

Although the airline grew its market share by keeping its sales and passenger numbers flat on the same period a year ago, it has been forced to scrap planned increases in margins, suggesting that profits will also be hit. It is understood that Flybe kept its prices broadly flat despite the rising price of fuel.

To add to the gloom, the group, which also flies from airports including Birmingham, Bristol, Cardiff, Doncaster, Edinburgh and East Midlands, said the conditions were expected remain “challenging” throughout its financial year to the end of March.

Flybe has cut the number of UK flights by 6% over the winter in response to falling demand.

Investec analyst Andrew Fitchie predicted Flybe will now make a loss of �8.5million in the year to March 31, compared to previous predictions of a profit of �6.4m, and he anticipates further losses of �1.3m the following year.

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However, Flybe chairman and chief executive Jim French, chairman and chief executive, insisted that Flybe had “a strong future in the medium and long term” and said its move into Europe following the acquisition of a Finnish airline was progressing well.

“The UK domestic market is clearly challenging,” he said. “Under such circumstances, notwithstanding the shortfall against our revenue expectations, I believe that maintaining volumes and growing market share at the expense of planned yield increases was the correct decision to protect the long term potential of Flybe.”