Forecast looks good for Flybe after cost-cutting

FLYBE, the regional airline, will assure investors it has entered a less turbulent patch after two years of losses when it posts its annual results this week.

City analysts are tipping the airline to report a full-year pre-tax profit of £6.7 million on sales of just over £620m. This compares to £23.2m in losses the previous year amid higher fuel costs and a declining domestic market.

Since then the group has axed some 450 jobs, closed regional bases and cut routes under a major cost-cutting programme. The firm raised £150m in February to boost its balance sheet and launch additional services.

Flybe has refocused on larger sites in its network, 
expanding its service from Birmingham, but closing 
bases in Aberdeen, Inverness, Newcastle, the Isle of Man, Jersey and Guernsey, although it will continue to fly to those airports.

Analysts at Cantor Fitzgerald said the group has completed most of its major restructuring and been able “to fix its balance sheet and provide funds for growth.”

The airline announced a five-year deal to fly from London City Airport in April. Brokers at HSBC lauded this as a good move but will watch how the airline fares on competitive routes such as London to Edinburgh. They will also keep an eye on how the firm markets off-peak flights out of the London airport.

However, HSBC is more sceptical about its January expansion in Birmingham, pointing out that rivals Monarch and Ryanair already have significant bases there with larger aircraft which run on lower unit costs.

Flybe, which is led by chief executive Saad Hammad, who replaced Scot Jim French last year, raised £150m through a share placing, boosting its cash balances to £218m by the end of its financial year.

It is due to report results on Wednesday.