Euro crisis and UK taxes put airlines into tailspin

THE outlook for Europe’s airlines looked bleak yesterday as regional carrier Flybe sank deeper into the red and a trade body warned industry losses could almost double this year as the eurozone debt crisis intensifies.

Flybe said its unadjusted pre-tax losses had risen to £6.2 million in the year to 31 March, up from £4.3m a year earlier, despite a 3.3 per cent increase in group revenues to £615.3m.

However, the airline grew its share of its domestic market to 28 per cent after passenger numbers lifted 2 per cent to 7.3 million.

Jim French, the carrier’s Scots-born chairman and chief executive, said the “disappointing” results reflected the impact of a challenging operating environment, particularly in the UK.

He also criticised government policy over air passenger duty, because travellers within the UK are hit by the tax twice, while those flying abroad only pay it on their outward journey.

French said: “A lack of a coherent and comprehensive transport policy, combined with illogical hikes in stealth taxation on an industry critical to the country’s economic prosperity, is having a detrimental impact on airlines such as Flybe and ultimately the economic prosperity of the UK’s regions.”

Invest analyst Andrew Fitchie said it had been an “extremely challenging year” for Flybe, as the deterioration in the UK economy was coupled with a sharp increase in fuel prices, but he predicted the airline would turn in a profit for the year ahead as oil prices ease.

Meanwhile, the International Air Transport Association (IATA) warned that losses across the European airline industry could rise to $1.1 billion (£708m) this year, up from its previous forecast of $600m, while the impact of a broader eurozone banking crisis “could easily wipe out” profits across the globe.