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[June 11, 2014]
FlyBe Revamp Paying Off, Books First Pretax Profit For Four Years
(Alliance News Via Acquire Media NewsEdge) LONDON (Alliance News) - Airline Flybe Group PLC Wednesday said it swung to a pretax profit in its last financial year, as revenue and passenger numbers increased and its restructuring of the business cut costs and improved efficiency.
Flybe has a UK-based operation, a joint venture with Finnair in Finland, a white-label operation with Finnair, and wants to push further into white label flying, where the company operates routes branded under another carrier. Its UK operation is one of the only remaining UK regional airlines, competing mainly with road and rail services from 35 airports, as well as flying to some European destinations.
However, it made big losses in recent years, and had to embark on a wide-ranging restructuring programme in an effort to cut costs and return to profitability. That revamp has included cutting staff numbers, stopping unprofitable routes and taking ownership of more of its own aircraft.
In March, the airline raised about GBP150 million in a placing to cover its funding requirements and growth plans, and in April it signed a five-year deal with London City Airport, adding new routes to Ireland and within the UK.
Chief Executive Saad Hammad, who took the helm last August and has been leading the restructuring started by predecessor Jim French, said its last financial year "marks the rebirth of Flybe!" It reported a pretax profit for the year to end-March of GBP8.1 million, compared with the GBP41.1 million loss it reported in fiscal 2013. That was its first pretax profit since its 2010 fiscal year.
Group revenue rose to GBP620.5 million, from GBP6,14.3 million, as revenue under management rose to GBP868.4 million, from GBP781.5 million, while revenue from its joint venture, which is excluded from group revenue, rose to GBP247.9 million, from GBP167.2 million.
Flybe's UK scheduled airline flew 7.7 million passengers in its last financial year, up from 7.2 million in fiscal 2013, even though capacity was cut by 1.4%. That meant load factor, a measure of how full its planes are, rose to 69.5%, from 64.1%. Passenger revenue per seat rose to GBP49.70, from GBP48.84.
It said it had a 55.1% share of the UK regional market, up from 52.4% a year earlier.
It cut staff costs to GBP107.6 million, from GBP129.6 million in fiscal 2013, while fuel costs fell to GBP120.0 million, from GBP122.6 million. Net airport and en route charges rose slightly, as did ground operations and maintenance costs, but marketing and distribution costs fell.
It cut over 1,000 jobs during the year, or 30% of its total workforce.
"As already announced, there will be some further job losses after this summer as seasonal routes are discontinued and some further aircraft are grounded, as planned. However, we believe that we are now on the verge of emerging from this period of retrenchment, and looking forward to future considered and careful profitable growth.
Overall operating costs, excluding restructuring costs, were GBP619.5 million, down from GBP640.9 million in the previous year.
"We implemented a turnaround plan to stabilise the business and then successfully raised over GBP150 million net to strengthen our balance sheet and drive sustainable profitable growth. The return to profitability is a great step forwards. This enables us to start implementing our twin-engine strategy of growing our UK branded business and our white label operations across Europe," Hammad said in a statement.
The CEO told CNBC that the company was now well funded, and had no plans to follow Ryanair Holdings PLC in tapping capital markets for funds. Europe's biggest low-cost carrier Tuesday issued its first ever Euro bond, worth EUR850 million, and will use the funds to help finance new aircraft that will be delivered later this year.
In the company's statement, Hammad said the airline had made a good start to its current financial year, meeting its expectations.
"Our decision last year to remove unprofitable routes will continue to impact revenue and profit into 2014/15. However our disciplined focus on revenue, cost and organisational discipline, our strengthened balance sheet and growth strategy give the board confidence that we will deliver further improvement in the current year and drive sustainable profitable growth over the coming years," Chairman Simon Laffin said.
Still, Flybe shares were down 2.2% at 136.938 pence Wednesday morning, amid a wider hit to airline stocks across Europe after German flag carrier Deutsche Lufthansa AG issued a profit warning, blaming lower-than-expected revenue in both its passenger and freight operations.
Flybe isn't currently paying dividends.
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