Flybe shares drop 36% on warning

Shares in airline Flybe plummeted yesterday after it warned of a “significant slowdown” in sales due to the wider economic circumstances.

Europe’s largest regional airline said it had increased revenue in the six months to the end of September, even after stripping out the impact of last year’s volcanic ash disruption. But the Exeter-based firm – run by Scots chief executive and chairman Jim French – also revealed that sales had dropped across its UK domestic network in the past month, adding that it was too early to say whether the slowdown was “a short-term reaction to the turbulent macro-economic environment”, or a longer-term market adjustment.

Sales in the six months were up 9 per cent on last year, but this was 1 per cent lower than expected. French said he was monitoring the situation, hinting that the carrier might cut capacity if demand did not pick up.

“In previous years, Flybe has demonstrated the resilience of its high-frequency business model by adjusting short-term capacity to meet reduced demand and being prepared to cut costs,” he said. “Our management team remains acutely focused on these areas.”

It hopes to fare better in Europe, after completing a joint acquisition of Finnish Commuter Airlines with Finnair in August. The Finnish business is trading as Flybe Finland and ten new routes are now on sale.

Andrew Fitchie, at Investec, said yesterday’s update was disappointing and slashed his full-year profit forecasts from £20.1 million to £6.4m. He still saw long-term value in the company and retained his “buy” recommendation, but said it was difficult to see the shares performing in the short term. The shares slumped 36 per cent to 65p.