Shares in Flybe take a dive as UK sales slow down

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REGIONAL airline Flybe lost 36 per cent of its market value yesterday after the squeeze on consumer spending led to a “significant slow down” in UK sales.

The airline issued its second profits warning this year, saying first half sales were about one per cent behind its expectations. Flybe added it would review its winter flying schedule.

The gloomy assessment of consumer demand and spending drove shares in the airline down 36.5p to 65p. Flybe floated on the London Stock Exchange in December 2010 priced at 295p per share.

“In line with many other UK consumer facing businesses, we noted in September a significant slow down in sales across our UK domestic network,” it said.

“It is too early to determine whether the September slow down in sales on our UK domestic routes is a short-term reaction to the turbulent macro-economic environment, or whether this is a longer-term market adjustment.”

Flybe, which operates from Leeds Bradford and Robin Hood Doncaster Sheffield airports, said underlying sales in the six months to the end of September rose three per cent.

It added flights from UK regions to European business city routes performed “particularly well”.

In May the Exeter-based airline warned the UK market would be weak this winter and said it would “de-risk” the business by removing aircraft and taking “decisive actions” to optimise capacity and yields.

The company axed its Leeds Bradford to Gatwick route in March, and yesterday said there are no plans to reinstate this route.

Chairman and chief executive Jim French said: “The recent slow down in sales on our UK domestic routes is obviously a development we are closely monitoring.

“In previous years, Flybe has demonstrated the resilience of its high-frequency business model by adjusting short-term capacity to meet reduced demand and being prepared to cut costs.

“Our management team remains acutely focussed on these areas.”

The airline said it flew 6.4m seats during the first half, about 200,000 more than a year earlier. However, after adjusting for the disruption from Iceland’s volcanic ash cloud in 2010, seat numbers were down 1.7 per cent on a year earlier.

Mr French said: “In the first half of 2011/12, despite some gloomy statistics regarding UK retail sales, we have delivered good growth in passenger numbers, load factors and yields, particularly across our UK to European network.

“It is also pleasing to start the roll out of our European growth strategy and we are encouraged by the positive feedback we are receiving from our new partners, Finnair, on the re-organisation and development of our joint venture, Flybe Finland.

“Our European division will continue to focus on the integration which is making excellent progress and will also continue to look for low-risk opportunities to expand this business.”

Flybe, which competes with airlines including Jet2.com and Ryanair at Leeds Bradford, said passenger revenues per seat have grown six per cent year-on-year.

It added forward ticket sales revenue for the winter are up one per cent – lower than hoped. “The board will continue to closely monitor trends and review its winter 2011/12 flying programme to ensure that capacity is optimally matched to demand,” it said.

Charles Stanley analyst Douglas McNeil said it was a “disappointing statement, though by no means disastrous”.

“We would still expect a decent increase in profits this year, but the risks to that are clearly mounting,” he said.

UAE Airline doing better

MIDDLE Eastern airline Etihad Airways reported its strongest-ever third quarter on surging passenger numbers.

Etihad Airways said revenues grew 39 per cent to $1.1bn (£711m) in the third quarter of 2011. The national airline of the United Arab Emirates said it has moved into monthly operating profitability, but did not provide numbers.

Passengers increased 18 per cent to 2.25 million. Its seat factor, a measure of how full its planes are, increased by 3.8 per cent to 80.7 per cent, the highest quarterly result in Etihad’s history.