FLYBE chief executive Jim French has announced the first jobs cull in the firm’s 30-year history in a sweeping attempt to steer the airline back to profit.
Scots-born French blamed the “brutal impact” of rising taxes on air travel for the move, which will see 10 per cent of a 3,000-strong UK workforce laid off in a bid to save £35 million and get back into the black next year.
The group will also review its network of 13 UK bases, which include Aberdeen, Edinburgh, Glasgow and Inverness. However, most of the job losses are expected to be at Flybe’s Exeter headquarters as well as Manchester and Newcastle. The restructuring is expected to cost between £10m and £12m.
Flybe also confirmed it was in talks that could see it take over some routes and aircraft from Aer Lingus if the Irish carrier is bought by rival Ryanair.
French said: “It is a matter of great regret that many valued and hard-working colleagues may leave the organisation and it was a decision I and the board have not taken lightly – it’s one we have tried to avoid and it is the first time in almost 30 years of business that we have had to take such action.
“However, faced with the brutal impact of a 160 per cent rise in air passenger duty (APD) over the past six years and the consequent 20 per cent decline in domestic traffic over the same period, we have to recalibrate the business. There is no escape from the £68m-a-year APD tax burden which Flybe has to pay as a result of increases successive governments have levied on the industry.”
He argued that Flybe paid a much greater proportion of its sales as tax because most of its flights are within Britain. Larger carriers with a greater proportion of their business outside of the UK pay less, as few other countries have such a high tax on air travel.
Flybe, which out-sourced its call centre last month in a move impacting 55 jobs, slumped into the red by £1.3m in the six months to 30 September, against profits of £14.3m a year earlier. It blamed the loss on high fuel costs and falling numbers of fliers.
The carrier has issued a series of profits warnings in recent years, causing its shares to slump in value from about 325p at the time of its flotation at the end of 2010 to less than 50p.
Quarterly figures yesterday revealed a 1.7 per cent improvement in the number of passengers flown, to 1.8 million. But passenger revenues fell 1.2 per cent to £136.9m in the three months to 31 December, and costs per seat edged upwards.
Results from the group’s joint venture with Finland’s flag carrier Finnair were more encouraging, with revenues almost doubling to £50.7m and revenue per seat up 11.8 per cent year-on-year. In its update to the stock exchange detailing the turnaround plan, the airline stressed cuts would be focused on management.
French said the new, “slimline” business model for Flybe’s UK scheduled services should deliver a £3 per seat profit target, and was a “clear and realistic plan” given that neither the UK economy or the tax situation was likely to improve any time soon.
Gerald Khoo, a transport analyst at Espírito Santo Investment Bank, said he was encouraged by the restructuring plan, which provided “some visibility on how the targeted savings are to be achieved”.