Flybe deeper into red but says recovery under way

Struggling airline Flybe has insisted its recovery is well under way despite full-year losses deepening after a turbulent year of battling soaring fuel costs, falling passenger numbers and higher airport charges.

Flybe assured investors that its recovery efforts were helping it make 'significant steps in the right direction'. Picture: PA

The regional carrier has stepped up its cost-cutting drive to stabilise the business and said it now hopes to make annual savings of £50 million by 2014-15 after slashing more than 20 per cent of its workforce and cutting pilot salaries by up to 5 per cent.

Flybe assured investors that its recovery efforts were helping it make “significant steps in the right direction”, having also recently quit Gatwick airport by selling its runway space amid plans to concentrate on its core bases including Birmingham, the Channel Islands, Manchester and Southampton.

But it admitted it had been a “disappointing” year as underlying pre-tax losses widened to £23.2m in the 12 months to 31 March from £7.1m after being squeezed by higher fuel costs and a declining domestic market. The bottom-line deficit increased to £40.7m from £6.2m a year earlier.

The Exeter-based group, which is run by Scot-born boss Jim French, has secured £30m of cost savings for 2013-14 against the £25m previously expected and aims to increase this by a further £20m over the next two years.

It has already cut around 490 roles, with a further 90 planned in the current financial year.

Flybe is also selling 25 pairs of take-off and landing slots at Gatwick to rival EasyJet for £20m to raise vital funds in a move that will see it cease all flights from the airport, where it currently flies more than half a million passengers to destinations around the UK. A wider review of its routes and network is still ongoing.

French, who is chairman and chief executive, said recent actions meant it was “now more strongly placed for the future”.

He added: “Our choices with regard to cost savings, outsourcing, headcount reduction, aircraft delivery deferrals and the sale of our Gatwick slots demonstrate the resilience and single-mindedness of the management team to turnaround Flybe.”

Its UK operations posted underlying losses of £17.3m against pre-tax profits of £200,000 the year before. UK passenger numbers fell 1.1 per cent to 7.3 million as it cut capacity by 2.7 per cent. The group’s other division – Flybe Outsourcing Solutions, which includes its Flybe Finland joint venture, contract flying arm and training academy – was also in the red with underlying losses of £2.3m.

But Flybe shares closed up 0.25p at 41.5p after the results, with analyst Gerald Khoo at Espirito Santo forecasting a sharp reduction in losses as the cost-cutting plans take effect. He predicted that the airline will now break even in the current financial year.

Last month’s sale of take-off and landing slots at Gatwick has sparked fears for air links to the Highlands.

There is no guarantee EasyJet will continue the service provided by Flybe to Inverness, which involves morning and evening flights designed around business travellers and people connecting to long-haul flights. Flybe said it would continue to operate all Gatwick to Inverness slots until March 2014. It operates 19 flights a week between London and Inverness with connecting flights continuing to locations such as Benbecula, Kirkwall and Stornoway.