The budget carrier’s profit expectations are hit by strong competition on key routes but it insists its recovery is on track
Flybe, the regional budget airline, has endured a stock sell-off after admitting its annual profits would fall short of expectations.
The carrier’s third quarter trading update said passenger revenues fell 3.8% in the final three months of 2014 to £126.8m amid strong competition on some new London City airport routes.
The statement said: “We believe that this competitive pressure will extend the period of time that these routes take to reach maturity and deliver the full contribution we expect.”
As a result, Flybe said it expected to break even before tax in its financial year, having reported its first profit in four years during 2013/14.
Flybe sold airport slots, slashed unprofitable routes, grounded surplus planes and cut jobs as it launched a three-year plan to revive its fortunes.
The shake-up included abandoning Gatwick – handing its space to easyJet for £20m in 2013.
While European routes have seen increased competition, forcing players to undercut each other on pricing, the fall in crude oil prices has come as some reprieve.
Regional airlines have stepped up hedging as they look to lock in huge savings, betting that a slide in crude oil to six-year lows may peter out near $40-a-barrel.
Flybe said it would not see significant benefits from lower fuel prices until 2016/17, due to its hedging strategy.
Its share price was trading 22% lower in early afternoon trading following a day in which its value plunged 24% at one stage.
Source : SKY NEWS